Economists Say Data Does Not Show Farm Economy In Crisis

OMAHA (DTN) -- As complaints about financial stress for farmers rise, some economists say the data doesn't show today's farm economy is in a crisis. Joe Glauber, a former USDA chief economist, and Vincent Smith, an economics professor at Montana State University, co-authored an op-ed for Dow Jones news service that challenges the argument that American farmers are facing a crisis. Glauber and Smith are both visiting scholars at the American Enterprise Institute. In the op-ed piece published Tuesday, Glauber and Smith challenged media portrayals of farmers struggling to make ends meet, stating: "The plight of American farmers always makes for good copy, even when the facts don't match the rhetoric. And when media reports suggest that farmers are about to face a financial crisis, based on one or two pieces of cherry-picked data, farm interest groups rush to Congress to ask for more subsidies, on top of the $20 billion a year already being given to crop growers." The op-ed comes as the National Farmers Union called on Congress and Agriculture Secretary Sonny Perdue to improve the safety net for farmers. NFU noted more farmers "are facing significant financial stress." The economists claim farm groups are willing to use "hyped information about farm bankruptcies" to push arguments for more commodity support. The op-ed points out "... Groups representing corn, soybeans, wheat, pulses and cotton growers have all complained of inadequate subsidies in recent months." Still, a broader look at economics shows there is no crisis, the economists stated. Farm bankruptcies are higher than they were a decade ago, but bankruptcy filings in 2018 were lower than 2010 and 2011 and about the same as 2012. The number of farm businesses has remained relatively stable since the 1980s. This back and forth about the state of the agricultural economy comes as Perdue prepares to testify Wednesday before the House Agriculture Committee on his take on the state of the farm economy. Perdue also testifies Thursday on farm bill implementation to the Senate Agriculture Committee. LOW BANKRUPTCY NUMBERS Nathan Kauffman, vice president and Omaha branch executive for the Federal Reserve Bank of Kansas City, highlighted bankruptcy data last week at the USDA Agricultural Outlook Forum. Delinquency rates for farmers rose to 4% in 2010, coming off the 2008-09 recession, despite stronger farm income that year, Kauffman pointed out. At the moment, delinquency rates are closer to 2%. Kauffman noted the higher delinquency rates and bankruptcies in 2010 occurred in the middle of biofuel expansion and growing demand from China. Further, more than 700 farmers filed Chapter 12 bankruptcies in 2010, but the total is closer to 500 today. "Even though there's been a slight uptick in bankruptcies the last couple of years, it was much more notable coming out of the recession than it has been coming out of this relatively long downturn in agriculture," Kauffman said. Broad changes in macroeconomic conditions can significantly affect every industry in the economy. Kauffman pointed out risks to farmers because of projected declines in global growth. The International Monetary Fund reduced its forecast for the global economy for 2019 from 3.9% growth to 3.5% growth. There are also concerns about the status of U.S. trade policy and the prospect of rising interest rates.