from the Kansas Fed
U.S. agriculture has experienced several boom and bust cycles over the last century. During the 1910s and 1940s, demand for food enhanced agricultural exports and farm profitability (Henderson, Gloy, and Boehlje 2011). These booms were followed by busts in the farm economy as the economic and financial conditions changed. In the 1970s, a spike in agricultural exports led to another sharp increase in farm incomes, followed by the largest agricultural bust in recent history, the farm crisis of the 1980s.
In 2006, rising commodity prices coupled with strong exports and demand for renewable fuels triggered another boom in farm incomes. Since 2013, however, the farm economy has experienced a period of declining farm incomes, lower commodity prices, and falling (though recently stabilized) land values.
While farm businesses continue to have relatively strong equity positions and historically low leverage, the prolonged period of low farm income since 2013 has eroded working capital on farms and increased financial stress. Although conditions between the two periods are notably different, this recent agricultural downturn has sparked questions about the possibility of repeating the farm crisis of the 1980s.
In this paper, we explore the agricultural sector indicators of farm incomes, farm assets and debt, land values, and credit availability that help define and explain the agricultural downturn. While economic conditions have deteriorated and farmers have experienced financial stress, the financial indicators of agricultural loan delinquency rates and bankruptcy rates have remained relatively stable during the recent downturn, making a repetition of the events that occurred during the 1980s farm crisis unlikely. Despite these positive statistics, concerns remain about the duration of this downturn and the ability of farmers to weather a few more expected years of similar conditions.
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