Even amid lagging profits from corn and soybeans, Ohio farmers have a reason to be somewhat optimistic, according to Ani Katchova, an associate professor and Farm Income Enhancement Chair in the Department of Agricultural, Environmental, and Development Economics at The Ohio State University. Katchova spoke at the Agricultural Policy and Outlook Conference on November 9, 2017, an annual event organized by AEDE at Ohio State, presenting research with post docs Lawson Connor, Robert Dinterman, and Ana Claudia Sant’Anna in the Farm Income Enhancement Program.
“In Ohio and nationally, farm incomes increased significantly until 2013, but have since been on the decline. However, that trend is expected to change this year with a forecasted increase in income for the first time in four years,” Katchova said.
Along with expected increases in farm income this year for farmers nationally, farm assets and equity are also forecasted to rise, Connor pointed out. While farm income may be rising, challenges remain.
“Expenses for farmers in 2017 are forecasted to continue to increase due to higher costs for hired labor, interest and fuel, with some declines in expenses for feed and fertilizer,” Katchova said.
Another hurdle for Ohio farmers is that cash rent farmers pay on farmland continues to increase and is higher than national average, Sant’Anna pointed out.
“In Ohio, cash rent did not come down during the agricultural downturn as much as it did in the rest of the states, showing that Ohio cash rents are sticky,” Katchova said.
However farmland values in Ohio continued to decline, contrary to land values and cash rents for the U.S. remaining flat for 2017.
“Farmers in Ohio and nationally continued to see their working capital eroding to only a third or a half of the levels at the peak of farm incomes, which has increased financial stress and reduced their ability to repay loans,” according to Katchova.
However, the agricultural downturn and increased financial stress have only resulted in small upticks in agricultural loan delinquency rates and farm bankruptcies, which are still at historic low levels.
“Agricultural loan delinquency rates for Ohio commercial banks have been at 1.3% since September 2016, a lower rate than 1.71% for US commercial banks,” according to Dinterman. “Ohio farm bankruptcy rates has been at 0.93 bankruptcies per 10,000 farms since 2006, only about half of the farm bankruptcy rate nationally,” he pointed out.
“Despite continuing challenges for the agricultural sector during the recent agricultural downturn, financial conditions seem to be improving, albeit slowly. When I say improving, we are coming from a low point in farm income,” Katchova said. “Hopefully, the worst is over.”
For more information:
Ohio Farm Financial Conditions and Outlook (power point presentation)
Agricultural and Policy Outlook Conference presentation (video)