Secretary of Agriculture Sonny Purdue tried to sound optimistic during a congressional hearing yesterday morning by saying that farm land itself is still relatively valuable even if what's produced on the farm is not, but he was also forced to admit that farmers are asking for loans in numbers not seen in the last 30 years.
Purdue told the House Agriculture Committee that farm debt has reached an "historically high" level.
The figures reflect a level of strain on the U.S. farm belt that is comparable to the agricultural crisis of three decades ago, this time driven by lingering weakness in commodity prices, storms damaging crops and loss of key export markets such as China due to President Donald Trump’s trade disputes.
“Farm debt has been rising more rapidly over the last five years, increasing by 30 percent since 2013 – up from $315 billion to $409 billion, according to USDA data, and up from $385 billion in just the last year – to levels seen in the 1980s,” Perdue said in his testimony to the House Agriculture Committee.
But he added: “Relatively firm land values have kept farmer debt-to-asset levels low by historical standards at 13.5 percent, and continued low interest rates have kept the cost of borrowing relatively affordable.”
This is all well and good (not really) and may not necessarily indicate that another farm crisis is looming, but it's certainly not sustainable.
There's not a great deal of reason to think commodity prices will rebound anytime soon or that Trump's trade war will even anytime soon. There's little reason to think conditions will dramatically improve in the near future.
In fact, 2019 could be even worse year for the agricultural industry because Trump's trade war and retaliatory tariffs imposed by other nations have been on the books from the beginning. In 2018, farmers at least benefited from the fact that Trump's trade war did not begin until the summer months.
If economic growth slows to a crawl in 2020 as an increasing number of economists predict, shouldn't we expect to see demand for farm loans soar even higher?
The next president is going to inherit dozens of ongoing shitshows to deal with.