U.S. Agricultural Economy
The U.S. agricultural economy continued to struggle in 2016 as prices and incomes
fell for the third straight year following an unprecedented sustained period of growth during the 2007-2013 period. The USDA is projecting 2016 net farm income to total $67 billion, down 17% from 2015 and 46% off the record high established in 2013. Given yields trending up, lower production expenses, and higher government payments, the downturn in the ag economy is due solely to significantly lower prices as the markets react to mounting global supplies and depressed/stagnant demand. U.S. agricultural exports have declined from record high levels in response to a strengthening U.S. dollar, sluggish economic growth overseas, and abundant supplies. Land values and crop rents appear to be slowly adjusting to the declining ag economy. Despite the sharp downturn in the U.S. ag economy, lenders are reporting that the financial position of U.S. agriculture as a whole is still relatively strong following a period of extraordinarily high income levels. However, concerns are mounting for some high debt/younger farming operations given current cash flow/working capital issues and the continued depressed outlook for most U.S. agricultural sectors.
Source: 2016-2017 Kentucky Agricultural Economic Situation and Outlook, University of Kentucky College of Agriculture, Food and Environment