LandCAN

LandCAN Library

LandCAN Library

  1. Home >
  2. LandCAN Library >
  3. The Wealth Effect in U.S. Agriculture

The Wealth Effect in U.S. Agriculture

By:

Since 2009, wealth in the U.S. farm sector has surged along with booming farmland values. Similar to nonfarm households, farm enterprises historically have used wealth to support consumption and investments when income fades. During years of low income, farmers tap their existing wealth to finance spending on capital investments such as buildings, vehicles, machinery and other equipment. Thus, similar to nonfarm households, the wealth effect often leads to sharp increases in debt and leverage in farm enterprises.Historically, the sharp accumulation of debt has preceded financial crises. Longerterm projections suggest that farm incomes could fall dramatically in 2014. If agriculture’s historical wealth effect holds true, farm enterprises might use existing wealth to finance and smooth investment spending, sowing the seeds for another round of debt accumulation.

pdf Download Full Article