Two Farm Economy Indicators To Watch

December 2, 2016 11:37 AM
 
 

Earlier this week, bankers, economists and industry experts met in Chicago to discuss the current farm economy and where it could be headed next. The group also discussed what indicators should be considered red flags for trouble to come. Here are two things American Farm Bureau Federation economist Bob Young is watching. 

1. Land as Collateral. Young says he watches the proportion of loans made where the collateral used to secure the note was the farmland itself.

“That took a significant uptick in 2016,” he says. “That concerns me.”

According to Young, farmers don’t use land as collateral because it’s part of some great business plan. Usually they do it because it’s the only asset they have left to fall back upon.

2. FSA Loan Defaults. In Young’s experience, another good indicator of struggles on the horizon for the farm economy is an uptick in defaults on FSA loans during the first quarter of the year.

According to USDA, U.S. net farm income is expected to drop again in 2016 to $66.9 billion. The agency cites weak prices for livestock, dairy and poultry farms as cause for the drop. However, many economists point to low grain prices as a contributor to the decline.

Bankers, farmers and economists alike are watching markets closely, hoping for a turnaround in the near future.

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Comments

 
Spell Check

Gordon Miller
BROWNING, IL
12/3/2016 06:23 AM
 

  Thank you.

 
 
Zorcon
Western, NE
12/3/2016 08:09 PM
 

  The end of 2016 and all of 2017 is going to be tough for many farmers. If there is an increase in land debt due to restructuring, it will only accelerate the bursting of the land bubble. We'll be on the rise for interest rates with Trump, foreclosures will be on the rise as well as bankruptcies. The warning signs have been there for the past two years. We've been on the precipice for two years and 2017 could push us off and right back to 1986. No one wants to admit it either, but the signs are there. Too bad we can't get the crap back in the goose.

 
 
Ed
Lincoln, NE
1/7/2017 05:01 PM
 

  Recently, York County Nebraska farmland located 50 miles west of Lincoln, Nebraska sold at auction. One 160 acre very hilly center pivot with a fairly new corner system sold for $7,300 per acre. Another 160 acre pivot land brought $7,100 by non-farming investors. The first tract of land adjoining my father sold in 1960s for $100/acre, then resold for $1,700 about 15 years ago by an investor. Farmers are facing challenges to repaying operating and production loans for 2016. Estimates of cost of corn production here are about $3.60 per bushel and cash bid are around $3.10. York County land has groundwater, productive land for crop production yet will be a challenge with high production costs and marginal grain prices for farmers to sustain the future without favorable avenues to reduce surplus supplies. Ethanol production in the area is one market outlet and trucking to feedlots for cattle use will be another possibility if feedlot operations can find some level of profit. Hopeful for some level of support in USDA farm programs as insurance coverage, favorable loans with long term repayments and weather allowing adequate timely rains with no hail, wind and long growing season for high quality grains for the market premium prices.

 
 

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