News Insights
Arable farmers in US facing hard hits
The agricultural sector in the US is on the brink of a recession. At least three-quarters of the more than seventy agricultural economists in the panel of the American news magazine Farm Journal expect this. Lower prices for agricultural products are certainly not beneficial for profitability.
On average, agricultural companies in the US are not doing too badly, but their financial health is deteriorating according to Farm Journal. Margins are particularly under pressure in arable farming. Grain prices have dropped more sharply than input prices. If this situation persists, the consequences will be greater. 2021 and especially 2022 were financially good years for the average American arable farmer. So, there was some cushion to bridge lean years. In the last two years, these reserves have been significantly tapped into. Livestock farming, specifically dairy and beef cattle, is performing much better than arable farming and pig farming according to Farm Journal.
Off-farm income
Companies that rent a lot of land and/or have a heavy debt burden are most sensitive to economic headwinds. Across the entire sector, signs of a recession are not yet apparent. "A larger portion of farmers have off-farm income to cushion cyclical fluctuations. Most farms have a healthy balance (thanks to rising land prices) and there are positive results and certain sectors where diversified farmers can benefit," writes Farm Journal. Full-time 'row crop' farms (row crops such as corn and soybeans) of 1,000 to 2,000 acres (approximately 400 to 800 hectares) with a large portion of rented land are facing the hardest hits.
