The U.S. ag economy continues to struggle because of low prices, trade disruptions and bad weather.
The current downturn has lasted for most of this decade, yielding percentage declines in net farm income that are comparable to the farm crises of the 1980s, 1950s and 1920s.
“We’ve been here before,” said John Newton, chief economist of the American Farm Bureau Federation.
Newton and other ag economists spoke during an Oct. 22 Farm Foundation Forum at the National Press Club in Washington.
The current struggles have their roots in the early 2000s, when prices for farm commodities began to rise.
Production surged in response — just in time for the Great Recession to push demand down.
USDA predicts net farm income this year will be $88 billion. That’s in the top 30% of crop years with available data, but “people aren’t acting like 2019’s better,” Newton said.
No wonder. If the $33 billion in government assistance and crop insurance is removed, 2019 farm income falls to the bottom half of the rankings, he said.
Trade conflicts instigated by President Donald Trump have added to the pain of oversupply.
Year-to-date ag exports are down nearly $6 billion from last year and even more compared to 2017, Newton said.
Sales to China alone are down almost $800 million so far this year, with soybeans the hardest-hit commodity. China used to buy one-third of the U.S. crop, but that’s down to 11%.
Other ag exports, from tobacco and sorghum to cotton, have suffered as well, Newton said.
As China pulled back, some countries did buy more U.S. soybeans.
The biggest increase came from grain powerhouse Argentina, where a domestic shortfall left crush plants scrambling to meet their sales commitments.
Still, “you cannot offset a buyer that buys 60% of the global soybean trade,” Newton said.
In the long run, trade may not be the biggest problem China poses, said Keith Coble, head of the Department of Agricultural Economics at Mississippi State University.
The Asian power now puts more public funding into ag research than the U.S., which could put America at a competitive disadvantage in the long term.
Coble said one Chinese researcher told him that his government’s policy was to build bigger and better universities than the American land-grant institutions.
Even if Sino-American relations thaw in the near future, Chinese demand won’t be what it was. African swine fever has caused the loss of up to half the country’s pigs.
In the U.S., Midwestern farmers have had their own disasters in the form of excessive rain and flooding.
More than 11 million acres of corn and 4 million acres of soybeans went unplanted this spring because of wet weather. Crop insurance payments could top $3 billion this year for just those two crops, Newton said.
Congress has also passed a disaster aid package for farmers, and USDA has dished out billions of dollars to mitigate export losses.
Another round of trade aid is possible, Newton said.
Even accounting for the wet weather in 2018 and early 2019, U.S. farmers have actually enjoyed a long period of relatively good weather, Coble said.
The 1980s farm crisis was punctuated by the drought of 1988, the devastation of which the United States has not experienced since.
Early in his career, Coble worked at USDA on ad hoc disaster programs.
The lack of certainty about those programs frustrated farmers and bankers, and standing aid programs became the norm.
But the recent trade and disaster packages mark something of a return for the less predictable ad hoc programs, Coble said.
Even with that extra aid, farm bankruptcies have increased, and loan delinquency is at its highest point since 2012, Newton said.
Many families are hanging on because of off-farm income.
“A lot of them say it’s ‘I’ve got a job off the farm or my spouse has a job off the farm. We drive the school bus. We work to get health insurance,’” Newton said.
But economists see warning signs for the long-running expansion in the broader economy, which could jeopardize some of those second jobs.
Farm loan delinquencies hit some of their worst levels during the 2009 recession when some farmers lost their off-farm jobs, Newton said.
Coble thinks the largest and most efficient farms are poised for continued growth.
“I see a lot of pressure in coming years to see the large farms with the best management skills using the best tools managing more and more acres,” he said.
Add in consumer interest in small farms catering to buy-local consumers, and the number of midsized farms will likely continue to shrink, he said.