Despite record high farm incomes and high crop prices, Secretary of Agriculture Tom Vilsack is still reassuring the American people that rumors of an impending farm crisis are unfounded.
American agriculture is currently one of the strongest components of the American economy. Crop prices are high, farmland value is up, and, despite rising operational costs, farm incomes are at all time highs. Despite this overall positive outlook, or perhaps because of it, many consumers, economists, and farmers are worried about a 1980s style farm crisis.
The 1970s saw a booming farm economy, much like the current one. Farm incomes were high and many Americans were optimistically predicting a new golden age of American farming. However, this booming production often rested on farm loans and borrowed money. When the 1980s saw overproduction and surplus crops, prices dropped and many farmers found themselves swimming in debt.
Some economists are worried that there are parallels between the current agricultural economy and the crisis of the 80s. While incomes are currently high, some farmers are predicting a drop in commodity prices (particularly as farmers plan on planting a record commodity harvest). In addition, with farmland values rapidly increasing as investors buy up valuable land, some groups are worried that the U.S. could see a repeat of the 80s, or even a repeat of 2008’s disastrous housing collapse.
Vilsack, however, is reassuring farmers and investors that the fundamentals of the farm economy are different now than they were in the 1980s. The primary difference, Vilsack said, was that farmers’ growth is not fueled by debt. In the 80s, about 60 percent of land sales were debt-financed. Current land sales are about 30 percent debt-financed. In addition, Vilsack pointed out that the farm economy is not solely reliant on high domestic crop prices. Recent free trade agreements with South Korea and Panama are expected to generate billions of dollars in farm revenue, further insulating the sector from the danger of a single price drop bringing down the whole economy.
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Written by: Justin Ellison / Farm Plus Staff Writer