• Market Crumbs

Buying Bigger Tractors Is Probably The Last Thing On Farmers' Minds

Image via Jed Owen on Unsplash

It's not just citrus farmers in Florida that are having a tough time as of late. According to the Federal Reserve Bank of Kansas City's latest report, conditions in the region point to a struggling agricultural sector.

Farm credit conditions in the Federal Reserve’s Tenth District deteriorated in the third quarter despite an increase in the price of certain commodities and additional aid to farmers. The Tenth District, which includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico, is the heart of America's agricultural sector. The size of the geographic area served in the district is second only to the Federal Reserve Bank of San Francisco.

Farm income in the region fell in each state within the district from a year ago.The ongoing trade war, volatile crop prices and steep decline in cattle prices due to disruptions at a major beef processing facility weighed on farm income.

The decline in farm income has caused farmers to cut back on capital spending. Farm household spending and capital spending both declined, with bankers in the region saying they expect the trends to continue.

Credit conditions are also deteriorating as the rate of farm loan repayments and borrower liquidity continued to decline. Bankers expect credit conditions to decline, leading to an increase in asset liquidations.

Even outside of the Tenth District, in Iowa, farm finances continue to falter. 85% of Iowa land is used for farmland and it's ranked first in U.S. corn and egg production. One-third of the country's hogs are raised in Iowa.

Iowa farm debt hit the highest level in the nation at $18.9 billion in the second quarter. 44% of farmers in Iowa are struggling to cover costs. "It's very, very concerning," said Alejandro Plastina, the Iowa State agricultural economist who conducted the study. "It’s getting harder and harder for farm operations to cash-flow their business."

U.S. farm debt is projected to reach a record high of $416 billion, according to the U.S. Department of Agriculture. Adjusted for inflation, the current farm debt is just below the 1980 record at $431.6 billion. That was just before the 1980s farm crisis struck. Farm bankruptcies across the U.S. rose 24% from a year ago to 580 filings in September, according to the American Farm Bureau Federation. That marks the highest monthly total since 676 filings in 2011.

With the administration focusing on the stock market, saying the economy is booming and repeatedly touting a trade deal as being close, farmers throughout the country are not experiencing the same level of success. We can only imagine the reaction of farmers when they were told to think about buying bigger tractors.

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