By RACHEL LANE

DC Correspondent

Washington, DC — After years of high farm incomes, the current farm economy seems bleak but is close to a historical rate.

From 2008 to 2013, US farmers had great weather, high production and good prices to sell crops and livestock globally. Since 2013, global demand has slowed while global production has also increased, said Seth Meyer, association director and research professor for the Food and Agricultural Policy Research Institute, University of Missouri during a Farm Foundation Forum last week.

He said it was the largest period of above-average farm income since World War II. It was not typical farm income and he isn’t sure it is possible to increase farm income in the next decade.

“It’s important to acknowledge that we’ve been here before,” Meyer said.

When considering what caused years of above average income, he said it was a combination of factors. Ethanol was being produced at the highest rate ever, Chinese demand for US products, especially soy, was high. Income rates globally were increasing and with it, the demand for more protein — especially in parts of Asia.

Forecasts expected more of the same in the future, but it isn’t happening and Meyer doesn’t think that it will happen.

Chinese farmers were purchasing 60 percent of the world’s soybeans. With the trade war, the Chinese hog farmers realized that they didn’t need to use as much soymeal to feed the pigs. They are now feeding the pigs a soymeal diet similar to what US farmers use, Meyers said. Add to that, the African Swine Fever has caused a de-population in Chinese pigs, decreasing the need for soy even more.

There is no country that can replace the demand China made for soybeans. 

John Newton, chief economist of the American Farm Bureau Federation, said China purchased one-third of every acre of soybeans planted in the US in previous years. This year, they purchased 11 percent of every acre.

“Other countries did step up and buy our soybeans last crop year… biggest new purchaser of soybeans was Argentina. They bought 65 million bushels of US soybeans,” Newton said. Argentina was only buying soybeans this year because the soybean crop in the country was bad and the crushing facilities didn’t have enough soybeans to meet their commitments around the world.

Prior to this year, the US exported 2 billion bushels of soybeans. This year, it was about 1.7 billion bushels, Newton said.

In addition to a decrease in demand for US agriculture products, Meyer said other countries have been increasing their production. In Brazil, farmers have started to plant two crops — soybeans earlier in the season, then corn after the soybeans have been harvested. In previous years, the farmers picked one crop to plant and harvest.

Before, US farmers could hold onto their harvest, selling throughout the year if supply — and prices — weren’t high. Now, US farmers face almost year-round competition from Brazil, he said.

The US has fallen below a 50 percent share of the global export markets in corn and soybeans, and below a 25 percent share of the wheat market.

Keith Coble, professor and head of the department of Agriculture Economics, Mississippi State University, and president of Agriculture and Applied Economics Association said the picture they were painting wasn’t rosy, but it was normal based on historic information, not the last decade.

Between trade wars and disputes, the CPTPP going into effect at the end of 2018, and weather, US farmers have had a bleak year. Government payments for natural disasters and the Market Facilitation Program, MFP, have kept the general farm economy on the positive side of a historic average, he said. Remove government assistance programs, and farm income falls below the 50 percent historic average.

According to ERS data, larger farms continue to be the most profitable, Cable said. The large farms grow at the expense of the medium sized farms.

“That’s been the nature of agriculture for a long time in terms of ag data analytics. I think we’re going to see those farms at the cutting edge of management are going to be the ones that survive, lease the land away from other people,” he said.

Small local farms have been growing in number, too, he said.

“The trend of hollowing out the (number of) mid-size farm is going to continue,” he said.

Jeff Swanhorst, CEO of AgriBank with Farm Credit said 85 percent of the farm assets is the real-estate, the soil. Swanhorst and two other Farm Credit CEOs from different regions of the country spoke to the Senate agriculture committee last week.

Land is, for the most part, holding its value across the country, though there has been some adjustment in the Midwest, he said, with Iowa and Illinois, specifically.

Looking at the numbers alone, it looks like the debt to asset ratio for farming is fine — 13.5% —but the numbers are misleading, Swanhorst said. The debt in agriculture isn’t evenly dispersed.

Most of the figures also don’t include off-farm income, where the farmer or a spouse works off the farm.

Newton said delinquency on loan repayments has increased, at the highest levels since 2012. More farmers are behind on their loans and more farmers are extending their loan repayments over longer periods of time. If it goes on too long, the farmers will declare bankruptcy.

When he asks farmers how they will continue if commodity prices remain low for five years, most farmers say they have a job off the farm or they work to get health insurance. If employment levels fall, some of the farmers will lose the jobs that are paying their farm debts.

“How much longer can we continue at peak employment?” Newton asked.

He said the most delinquencies on loans happened in 2009, when people lost off-farm employment.

While 2019 hasn’t been better for farmers, most of the disaster relief and MFP funding hasn’t been awarded yet, Newton said.

“When all the disaster relief money has gone out, maybe, just maybe 2019 will be a better year for farmers and ranchers” he said. “But it’s only on the back of the federal government that it's a better year and that brings a lot of concern for farmers and ranchers when they’re trying to reach out to their lenders for the next growing season.”