While the US stock market continues to set new records, the country’s farmers are having trouble paying their bills – MarketWatch reported.
American farmers are trying to escape the recession that began in 2013. Source: internet
American farmers are trying to escape the recession that began in 2013. Source: internet
Last Friday, all three major US stock indexes hit records thanks to hopes that the US and China will soon sign a trade deal. In particular, the Dow Jones index surpassed the 28,000 mark for the first time and closed for the fourth consecutive week of gains. The S&P 500 rose for six consecutive weeks, its longest winning streak since November 2017.

In contrast to the excitement on Wall Street, the picture of financial conditions in major US agricultural states such as Colorado, Kansas, Nebraska, Oklahoma, Wyoming, as well as western Missouri and northern New Mexico is bleak. Data from the Federal Reserve Bank of Kansas City shows that farm incomes in these states are down sharply compared to a year ago, while credit conditions for farms are getting tighter.

US farmers are trying to escape a downturn that began in 2013, but things have gotten worse due to the country’s trade conflicts with major trading partners including China, Mexico and Canada since President Donald Trump took office. The trade war has caused agricultural exports to decline and agricultural prices to fall further. Along with that, extreme weather such as floods, cold weather, drought … make agricultural production more difficult.

In Iowa, the nation’s top producer of corn, eggs, and pork, farm debt reached $18.9 billion in the second quarter of this year, more than any other state.

The Trump administration has offered several bailouts to the agricultural sector, but Iowa farmers are in dire financial straits. According to a report from Iowa State University, 44% of farms struggled to pay their bills in 2019.

“It’s very, very worrying,” said economist Alejandro Plastina, an author of the report. “Farms are having a hard time generating cash flow from their agricultural operations.”

Plastina predicts Iowa farmers will continue to struggle through the rest of this year and even into 2020 because of bad weather and a lack of recovery in crop prices.

Over the past two years, Mr. Trump has rolled out $28 billion in bailouts for the agricultural industry, aimed at offsetting the impact of the trade war. But Mr. Plastina said the aid Iowa farmers have received has slowed, not reversed, the worsening financial picture.

Many farmers are now working around the clock to cut costs and restructure debt. Some are selling off unnecessary equipment and even land to stay afloat.

In September, U.S. farm bankruptcies surged 24% to the highest level since 2011, amid the U.S.-China trade war and a year of bad weather. In the 12 months through September, there were 580 farm bankruptcies under Chapter 12 of the U.S. Bankruptcy Code. Leading the way is Wisconsin – a state in the top 5 of the US’s milk-producing states – with 48 bankruptcies, according to data from the American Farm Bureau Federation (AFBF).

The US Department of Agriculture forecasts that net farm income in the country will reach 88 billion USD in 2019, down 29% from the record high set in 2013. It is worth noting that nearly 40% of this income, equivalent to about 33 billion USD, comes from federal support programs such as trade support, disaster relief support, etc.

The difficult situation of US farmers shows the harmful effects of tariffs that China imposed on US agricultural products in retaliation for Mr. Trump’s imposition of tariffs on Chinese goods. This could have a negative impact on Trump’s re-election chances in the 2020 US presidential election, as American farmers were an important constituency that propelled him straight to the White House in the 2016 election.

This situation also shows the importance of the phase 1 trade deal that the Trump administration is negotiating with Beijing. The content of this agreement includes China increasing its purchases of US agricultural products in exchange for Washington suspending further tariffs on Chinese goods.

The US Department of Agriculture predicts that the country’s farm debt will soon reach a record $416 billion. While Mr. Trump has praised the record-breaking US stock market, saying that this is a sign of strong economic growth, American farmers are not in such a rosy picture.