Energy & Environment

How American farmers can avoid another economic slump

Farmer tending to crops
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America’s agricultural economics run in cycles — each lasting 30 years since 1900 and including periods of decline in U.S. farm income and agricultural land value.

Today, we are in a downturn, with farm income 40 percent off its high and agricultural land value in various degrees of decline nationwide.

{mosads}Economists can merely speculate whether this downturn rebounds (as after World War II), deepens (as in the 1980s) or bottoms out (as in the Great Depression). History may not repeat, but it does rhyme. We have been here before — at a junction of caution and concern, but also hope and opportunity.


Amid the uncertainty, farmers can look to the USDA’s Cooperative Extension Service — which has helped sustain, assist and educate agricultural producers since 1914. Established by congressional action and facilitated by land-grant universities nationwide, Cooperative Extension shares community-customized solutions in agriculture and natural resources, community development, health and human sciences and 4-H youth development.

Living where they work, our local Extension educators deliver objective university expertise — placing tools to weather this downturn in farmers’ backyards.

Farm financial crises arrive in two stages: a lack of profits and a lack of cash to pay off subsequent operating loans that can cause bankruptcy.

Rising costs, a strong dollar, weak exports and falling commodity prices cause lower profits — forcing farmers to apply working capital toward production costs. If that runs out, farmers turn to financiers for credit — against which they often present their land as collateral. Nearly 90 percent of a family farm’s net worth comes from the farmland’s value. If interest rates spike, farmland value drops — eroding net worth and collateral. As debt mounts for farmers, bankruptcies emerge.

Solutions to avoiding mass farm bankruptcies like those of the 1980s stem from increasing productivity — greater efficiency for existing products and/or higher value for new products. This enhances lives and livelihoods with vibrant communities, strong families and profitable businesses at farm gates and on Main Streets.

Cooperative Extension guides producers toward informed, strategic decisions on cash rent, risk management, interest rates, investments and marketing — while facilitating one-on-one consultations with them on navigating each farm bill passing through Congress to their advantage.

The program strengthens farming’s next generation and its new generation — assisting family farm operations with succession planning programs and encouraging the industry’s future with beginning farmer programs.

Cooperative Extension’s leading-edge work in soil health, water conservation and nutrient management helps producers maintain best practices for their inputs — introducing potential for value-added or new commercial products.

Wherever this downturn goes, producers’ agility, education and opportunities are keys to emerging from it favorably. That is what Cooperative Extension offers through premier research and proven resources. American farmers are facing challenging times. But with the help of the Cooperative Extension Service and land-grant universities, agricultural producers can remain efficient, nimble and successful.

Jason Henderson, Ph.D., isassociate deanin Purdue University’s College of Agriculture and Director of Purdue Extension. He is a national expert on topics such as land values, agricultural finance, entrepreneurship, demographics and economic development in rural America.

 The views expressed by contributors are their own and not the views of The Hill.

Tags Agriculture American farmer USDA
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