Don’t be fooled by the recent rally for crop prices, as there’s still more pain ahead for the U.S. farm economy.
That’s the view of CHS Inc., the country’s largest agricultural cooperative. U.S. farm net-income is falling at a steeper rate than cash receipts, showing that fixed costs, such as land and equipment, are too high, said chief executive officer Carl Casale.
Farmland rents are demonstrating “stickiness” and aren’t dropping much, if at all, he said Tuesday during the National Grain and Feed Association convention in San Diego. The U.S. farm economy is “not at bottom,” he said.
The U.S. Department of Agriculture estimates that domestic growers will see net farm-income fall for a third straight year to $54.8 billion in 2016, as excess supplies of crop and livestock products depress prices. While prices for wheat, corn and soybeans have recovered this month, the commodities are still trading near multi-year lows.
CHS is planning cut expenses this year and will freeze costs during the next two years to help avoid trimming its workforce. While it can’t make guarantees, the company is “hugely committed” to weathering the farm economy downturn without massive layoffs, Casale said.