The good news? The agriculture sector’s long-term financial strength looks good. Income and wealth for farm businesses have changed noticeably over the last 10 years. Asset levels have outpaced debt, despite a recent fall in land prices, and equity has more than doubled for farm businesses in that timeframe.
But, according to the recent “The Debt Finance Landscape for U.S. Farming and Farm Businesses” report from USDA’s Economic Research Service, recent declines in farm income and falling land prices have raised concerns about the financial position of U.S. farms.
Falling commodity prices have dimmed farm income prospects for this year and tightened cash-flows have stalled the impressive growth in farm asset values experiences over the past 20 years. Despite the sector’s long-term financial strength, these developments have created concerns that farmers may be unable to meet debt service obligations and pay household expenses if financial conditions worsen, the report notes.