By Todd Kemp, Senior Vice President, Treasurer
A House Agriculture Committee subcommittee on Nov. 19 conducted a hearing to examine financial and credit conditions in U.S. production agriculture.
The lone witness during the hearing was Glen Smith, chairman and CEO of the Farm Credit Administration, the government agency charged with examining and regulating entities in the Farm Credit System (FCS).
Trade uncertainties, large commodity supplies, and weather extremes were cited by Smith as challenges facing the current farm economy. He noted USDA estimates that net cash farm income in 2019 will remain well below record levels set six to seven years ago, but that the U.S. Department of Agriculture’s Market Facilitation Program payments during 2019 will raise net farm income to near averages achieved over the last two decades. Smith also called attention to U.S. farmers having taken on $41 billion in additional farm debt over the past three years. In that regard, he said that, adjusted for inflation, total farm debt is near the record set almost 40 years ago. In particular, Smith and House subcommittee members pressed the importance of adequate credit for young, beginning and small farmers and ranchers.
During the hearing, a number of subcommittee members cited trade uncertainty as perhaps the biggest issue affecting farm-level finances currently. Approval by Congress of the U.S.-Mexico-Canada Agreement, conclusion of a trade agreement with Japan, and resolution of the U.S.-China trade disruption each were highlighted as critically important to U.S. farm income prospects.
Even with these current economic pressures, Smith testified that most farms remain financially strong and that credit stress within the FCS’s farm loan portfolio remains low. However, he noted that loan weakness continues to creep up, with financial stress regionalized and most prevalent in commodities like dairy and grains.