Report: Ag economy adjusting to historical returns

August 8, 2017
News

Wendong ZhangWendong Zhang, assistant professor, and a recent ISU report on the current ag economy were cited in an editorial by Brendan Sullivan, The Omaha World-Herald, "Current ag economy downturn shouldn't mirror the bad days of the ’80s."

"The 1980s, Zhang says, were marked by a “highly leveraged” ag sector, with “staggering agricultural debt.” By 1978, “the debt incurred averaged 76 percent of the purchase price, and between 1970 and 1980, the amount of farm mortgage debt increased 59 percent.”

In the current situation, the financial stress on individual producers is considerable, but in terms of the overall situation, the “balance sheet of the U.S. farm sector is still very strong,” as “seen from the low level of debt-to-asset ratio.

A significant if technical factor that has restrained excessive lending, Zhang says, is that the collateral value now used for agricultural loans “is often calculated using a cash flow approach, as opposed to inflated market value.”

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