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2019 is fifth straight year of farm returns below 2%

Low returns create challenges that ripple throughout rural economy.

The chief economist for the American Farm Bureau Federation said the average rate of return for U.S. farmers is 1.3% this year, marking the fifth straight year of returns below 2%. Dr. John Newton spoke Aug. 5 at the International Sweetener Symposium.

That rate of return translates to a negative median farm income of -$1,449 this year, forcing most producers to depend on a growing amount of off-farm income to make ends meet. Returns this low create challenges for agriculture – from keeping pace with rising input costs to repaying operating loans – and the impact ripples throughout the rural economy, he said.

“Commercial debt in agriculture is at record highs, loan delinquency rates are rising, and Chapter 12 bankruptcies have increased sharply,” Newton told the group. “Some major lenders are reducing their exposure to agricultural loans and reducing lending volumes.”

Brian Cavey, senior vice president of government affairs for CoBank, said his bank continues to be a major agricultural lender, with 100% of its business focused on farm credit, agribusiness lending, and rural infrastructure. 

“Right now, the name of the game is managing risk and uncertainty,” Cavey said.

This kind of environment necessitates strong farm policies to give lenders confidence that loans will be repaid in a timely manner. Protecting crop insurance and opposing cuts to the farm safety net are top priorities for CoBank, he said.

Source: American Sugar Alliance, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 
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