Witnesses in the first House Agriculture Committee 2018 Farm Bill hearing sang the same tune Wednesday morning. The farm economy is not as bad as the 80’s but challenging.
USDA reported this week net farm income fell 45 percent from 2013 to 2016, the largest 3-year percentage drop since the Great Depression. Five economists testified before the full House Ag Committee regarding the farm economy and what should be addressed in the next farm bill.
USDA Chief Economist Dr. Robert Johansson shared his concerns first.
“None of us are painting the same picture as we saw in the 80’s. Things I would continue to look for in the data would be rising interest rates, pressuring interest payments as well as declining land values.”
Dr. Nathan Kauffman is Assistant Vice President of the Federal Reserve Bank of Kansas City. He says problems in 80’s arose from a liquidity crisis that turned into a solvency crisis.
“We do have some of those concerns around liquidity today but as I noted in my statement, debt to asset ratios remain relatively low and historically low. If we were to see more of a decline in land values that would be an additional risk to the farm sector.”
Dr. Joe Outlaw is an economist at Texas A & M.
“They are exactly right. The cash flow situation is bad. The equity situation isn’t quite as bad but we can see it on the horizon. If cashflows continue to struggle then they are going to lose equity.”
Director of the Food and Agricultural Research Institute at University of Missouri Dr. Patrick Westhoff agreed. Assistant Professor at the University of Missouri Dr. Scott Brown stressed the importance of fixing the Dairy Margin Protection program.
Other topics addressed included: Immigration, crop insurance, cotton industry, renewable fuels standard and trade.
The Senate Agriculture Committee will hold their first hearing at Kansas State University in Manhattan, Kansas next Thursday.