Senate Ag Committee Eaxmines Rural America

During the Q and A portion of yesterday’s Ag Committee meeting, Chairman Roberts queried, “As we begin to work on our next farm bill, give me the top three factors, or two factors in the agriculture economy that we should be considering, given this trend that everybody is talking about, and the word ‘prolonged.'” Dr. Johannson noted that, “As you mentioned, there are ways that we can see prices rebound. Whether we have some supply side shock in some major producing part of the globe or if we do start expanding trade quickly, those will also push prices up. But for right now, relative to 2014, stocks are really relatively high.“So back then the farm bill pivoted towards countercyclical types of Title I programs. This time, as you consider farm bill programs, certainly the Title I programs would be one that I would look to in terms of the fact that countercyclical programs may have to be reexamined in the price when we have flat prices relative to volatile prices.”Dr. Kauffman pointed out that, “So we’ve seen persistent cash flow shortages the last several years, demand for financing. As profit margins have remained weak, we’ve seen liquidity decline. That would be the first, is just monitoring the trend in liquidity.“We haven’t seen it turn into an issue of solvency, partly because of farm real estate values. Farm land values have remained relatively strong in some—in most areas, although I would cite that as a second area where, if we did see more rapid declines, then we could start seeing more balance sheet problems for farm operations, as debt to asset ratios could rise further from there.”