The rural economy across the Midwest could take a hit this year. The U.S. Department of Agriculture expects a 36 percent drop in net farm income, according to economic forecasts released Tuesday.
Lower prices for wheat, corn, soybeans and hogs will hurt many Midwest farms, though USDA economist Mitchell Morehart says the impact could be lessened on some farms thanks to lower production costs. Fuel and feed expenses are both lower this year, though labor is higher.
"It’s a mixed picture" on the expense side, he says, "so it depends on how each individual business is configured in terms of the importance of each of those inputs."
Parts of the Midwest could see declines lower than the predicted national average, but no part of the nation will be spared.
"We see declines being widespread," Morehart says. "In other words there is not a region of the country where incomes are going to go up in 2015, in our current forecast."
But Morehart says that doesn’t mean the long-term outlook for farming is bleak.
"The balance sheet remains very financially sound," he says.
Land values and rents remain strong. Although farmers have taken on more debt than they’ve had in recent years, Morehart says that’s not a cause for alarm.
"There’s a lot of reasons why there’s not comparability to what occurred in the 1980s," Morehart says.
Prominent among those: interest rates that are five to ten times lower now than they were back then.