Ani Katchova, AEDE Associate Professor and Ohio State’s Farm Income Enhancement Chair, presented at a Capitol Hill briefing on February 11, 2016 focused on “Dynamics of Farm Profitability: Factors Influencing the Decline in Income.”
Jeffrey Hopkins from the USDA’s Economic Research Service (ERS) and Allen Featherstone from Kansas State University presented with Katchova. The briefing was organized by The Council on Food, Agricultural & Resource Economics (C-FARE) and the Agricultural & Applied Economics Association (AAEA).
While in Washington D.C., Katchova also visited with staff for Ohio Senator Sherrod Brown to discuss the agricultural outlook for the state of Ohio. She also met with Senator Pat Roberts, Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, and with USDA Chief Economist Robert Johansson to discuss U.S. farm income and farmland market trends.
“I felt honored to have the opportunity to share information and present at the Capitol Hill briefing,” Katchova said.
During the briefing, Katchova presented an analysis of data from USDA ERS’ February agricultural forecast. Reflecting on declining farm incomes, Katchova noted:
- In 2016, net cash farm income is anticipated to decline by 2.5 percent
- Net farm income is anticipated to decline by 3 percent between 2015 and 2016.
- Also in 2016, farm assets are expected to decline by 1.6 percent, farm equity by 2.2 percent, and farm debt is anticipated to grow by 2.3 percent
However, despite these tensions in the marketplace, Katchova noted that there is hope. “Even with two years of forecasted decline, the farm sector balance sheet is very strong with solvency ratios for the agricultural sector that are near historic lows,” she said.
Additionally, she reflected on farmland values and rents in her briefing using an analysis of data from USDA’s Land Values Summaries. She noted:
- U.S. cropland values increased by a modest rate of 0.7 percent in 2015
- U.S. cropland cash rents increased by 2.4 percent in 2015.
- Regionally, while Ohio experienced an increase of 3.5 percent in cropland values in 2015 and 3.6 percent increase in cash rents in 2015, several other states in the Corn Belt experienced declines. Regarding this discrepancy, Katchova noted that one explanation is that rental contracts are typically not negotiated every year and farmers may not be willing to lose control of their rented acres.
At the briefing, Katchova also presented her research with Mary Ahearn from USDA ERS on the land needs of beginning and young farmers. They have found that these groups own less farmland than their established counterparts and current low farm income rates may be impacting them greatly.
“Not only do beginning and young farmers need to pay land rents and debt payments on real estate, but they also need to grow as they establish their operations which puts additional pressure on their declining farm income,” she said.
At the briefing Katchova also noted that farm financial ratios, measuring liquidity, profitability, and solvency have all worsened in the last two to three years, but they are still among the highest in the last decade.
“Overall, the ag sector is coming down from historic highs but is currently in a strong position, with only a limited number of farmers experiencing financial distress,” she said.
Top image: Ani Katchova presented at the Capitol Hill Briefing “Dynamics of Farm Profitability: Factors Influencing the Decline in Income,” organized by C-FARE and AAEA, February 11, 2016.
Bottom image: Ani Katchova discussed future trends in farm income and farmland markets with Senator Pat Roberts, Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, February 11, 2016.