The ag economy isn’t doing well, and in anticipation of the latest crop production report from the USDA, there’s no telling what could happen. Some media sources are spinning the poor ag economy into positive news for consumers—low food prices—a trend that’s been happening for the past nine months. According to Bloomberg, this streak of food deflation is the longest since 1960.
On AgriTalk Tuesday, Scott Irwin, ag economist at the University of Illinois, spoke about cash rents and operating loans, He said by the end of 2016, start of 2017, the average farm will be drawing down its “working capital reserves to where they were they were when the great boom started.”
Listen here for Irwin and Chip Flory’s discussion on the ag economy here:
While it is still early, Irwin says some have told him operating loans will be a rising issue with banks.
“Ag banks are pulling in the reigns and substantially raising collateral obligations for those operating notes,” said Irwin. “There’s definitely going to be some scrambling this fall and this winter.”
Irwin predicts if low prices continue to stay at the current range, cash rents will have to “ratchet down.”
Historically, according to Irwin, at the end of 2016 and the beginning of 2017, there should be a 3-year run of low prices. These historical standards go back 30 to 40 years.
Listen below for Irwin’s total time on AgriTalk here: