Some economists are warning that farm foreclosures may “spike” in 2010.
Farmers, particularly those raising dairy cattle and hogs, have suffered significant losses in the past two years. Net farm income was down by about a third in 2009 and David Miller, director of research for the Iowa Farm Bureau, expects farm income to be down next year, too.
“The farm economy is lagging behind the general economy in terms of its deliquencies and its level of debt,” he says. “…But because the farm economy…may also be lagging behind in terms of its recovery, we think…farm debt, delinquencies, etc. — that the spike in those may well come in the year or two ahead of us.”
Miller doesn’t expect corn prices, for example, to rise back up to 2008 levels.
“Corn prices, if we’re looking at 2010 versus this year, are likely to 10 to 12 percent below what they were in the current year and 15 percent below what they were in 2008,” he says. “So siginificant reductions in the revenue coming out of our crops.”
And Iowa State University economist Arne says hog producers have been losing money since the third quarter of 2007.
“You’ve got a lot of livestock people who are not in foreclosure, but they’ve been running with very large losses for a long enough time period that that debt has got to be accumulating,” Hallam says. “And so I am, also, particularly concerned about the hog sector that you are going to see foreclosures. A lot of people put up plants with the assistance of packers…or other types of units and those are eventually are going to come due and I think we are going to see some debt problems.”
The Farm Bureau’s research director says the ag sector has always been “more volatile” than the economy as a whole, but that volatility has been “accentuated” in the past decade because corn prices have been more directly linked to the price of oil through the production of corn-based ethanol.