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US Ag Survey Reveals Financial Stress

09 March 2009

US - Volatility and risk dominated agriculture in 2008, but what does this mean for the agricultural economy in 2009 and beyond?

In an effort to better understand what is happening in the agricultural economy, a survey was conducted in January 2009 by the Extension Risk Management Education Regional Centers and the Center for Farm Financial Management at the University of Minnesota, funded through the USDA CSREES Risk Management

Eighty-four per cent of agricultural professionals surveyed expect the probability that producers will experience financial stress in the next three years is high or very high.

If we look at just lender responses, the view is not quite as negative, says the report. Twenty-six per cent of lenders think the probability is very high that producers will experience financial stress in the next three years versus 39 per cent of all respondents. Eighty per cent of lenders expect the probability is high or very high.

To provide more specific information, respondents were further asked to describe how many of the producers with whom they work are experiencing financial stress now and how many they expect will experience financial stress in the next three years.

Currently, 63 per cent of respondents stated that 10 per cent or less of the producers they work with are experiencing financial stress, with 15 per cent indicating that less than 2 per cent of the producers they work with are currently experiencing financial stress.

In the next three years, however, more than 28 per cent of respondents expect at least 30 per cent of their agricultural clients will experience financial stress. Seventy-five per cent of respondents expect 11 per cent or more producers will experience financial stress in the next three years.

Respondents were also asked to identify the impact various factors are having on farm and ranch financial stress. The major factors are the price/input cost margins, price volatility, and negative cash flows. Inadequate business planning and lack of financial skills are also important factors.

Only 8 per cent of producers are well equipped in terms of financial management skills to manage their businesses through a period of financial stress. The encouraging response is that nearly three quarters of producers are moderately well equipped and with some assistance could do a good job of managing financial stress.

Further Reading

- You can view the full survey by clicking here.

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