Current Indicators of Farm Sector Financial Health

Following a steep decline in agricultural commodity prices, the past several years have seen a weaker market for farmland and an uptick in interest rates. At the same time, farm sector income has declined and farm interest expenses have increased. How vulnerable might the farm sector be to a further decline in commodity prices or a rise in interest rates? Inflation-adjusted net cash farm income for the sector is forecast in 2018 to be 38 percent lower than its peak in 2012 and 7 percent below its 1970-2016 average. The farm sector’s debt-to-asset ratio, a key indicator of financial solvency, reached a historic low in 2012 and has remained low since then by historic standards. If farm income remains near current levels, projected interest expense-to-farm earnings ratios suggest that the farm sector is unlikely to face extensive debt repayment challenges by 2019.