The House Ag Committee kicked off discussions ahead of the upcoming farm bill debate with a hearing on the rural economy.
Reports show that 1 in 10 farms are now highly or extremely leveraged with actual debt approaching levels prior to the 1980s farm financial crisis.
Chairman Mike Conaway of Texas says he’s concerned that the current ag economy is headed down the same path.
Nathan Kauffman with the Omaha Branch of the Federal Reserve Bank of Kansas City says the 1980s was a liquidity crisis that turned into a solvency crisis.
“We do have some of those concerns around liquidity today,” he says. “But as I noted debt-to-asset ratios remain relatively low and historically low. If we were to see more of a decline in land values than what we’ve seen so far—that would be an additional risk to the farm sector to solvency. We haven’t seen those types of bankruptcies yet.”