Farmers across the country are walking through one of the toughest economic downturns in recent history. Recently, USDA Economic Research Service (ERS) released data that suggested this downturn is has bottomed out and farm income is about to improve. Is it really improving?
A recent report from Farm Policy Facts (Farm Policy) disputes USDA’s claim that net farm income is increasing enough to offset the recent downturn. According to the group, net farm income (NFI) is often analyzed in nominal dollars which is why looking at graphs, NFI appears to be increasing over time. However, if you looked at NFI in “real dollars” or figures adjusted for inflation to compare apples to apples it becomes clear that NFI has remained stagnant for the past several years as the value of production and the cost of expenses have increased.
“Farmers and ranchers have managed through this stagnant NFI only by increasing their productivity,” the report from Farm Policy says. “Increased yields, decreased inputs and technology have all allowed farmers to remain competitive – doing more with less.”
|Real Dollars Comparison (in Thousands)
|Value of Production
|Net Farm Income
Source: USDA ERS via Farm Policy Facts
In 2011, NFI was at a record high which allowed many farmers and ranchers to build equity and cash reserves to manage through the recent downturn, but, because NFI dropped 50% from 2013 to 2016, most of that cushion is used up.
“Farmers and ranchers continue to deal with extremely hard times, thin to negative margins and dwindling reserves and equity that small, projected increases –or increases on paper–may do little to mitigate,” the report from Farm Policy says. “With the 2018 Farm Bill fast approaching, we should resolve to stand by these independent farm enterprises in a time of real need.”