The purpose of this paper is to examine the current farm economic downturn and credit restructuring by comparing it with the 1920s and 1980s farm crises from both economic and regulatory perspectives.
This paper closely compares critical economic and regulatory aspects of the current farm downturn with two previous farm crises in the 1920s and 1980s, and equally importantly, the golden eras that occurred before them. This study compares key aggregate statistics in land value, agricultural credit, lending regulations, and also evaluates the situations and impacts on individual farmer households by using three representative case studies.
The authors argue that there are at least three economic and regulatory reasons why the current farm downturn is unlikely to slide into a sudden collapse of the agricultural markets: strong, real income; growth in the 2000s, historically low interest rates; and more prudent agricultural lending practices. The current farm downturn is more likely a liquidity and working capital problem, as opposed to a solvency and balance sheet problem for the overall agricultural sector. The authors argue that the trajectory of the current farm downturn will likely be a gradual, drawn-out one like that of the 1920s farm crisis, as opposed to a sudden collapse as in the 1980s farm crisis.
The review provides empirical evidence for cautious optimism of the future trajectory of the current downturn, and argues that the current downturn is much more similar to the 1920s pattern than the 1980s crisis.
The authors wish to thank Charles Brown for sharing his farmer C case study, and Chad Hart, Kelvin Leibold, William Edwards, Robert Jolly, Mike Duffy, and Dale Nordquist for discussions and comments on an earlier draft, especially regarding the farmer B case study. The authors also appreciate the feedback from the participants of 2016 NC-1177 meeting in Denver, Colorado. This work was supported in part by the USDA National Institute of Food and Agriculture Hatch projects 1010309 and NC-1177.
Zhang, W. and Tidgren, K. (2018), "The current farm downturn vs the 1920s and 1980s farm crises: An economic and regulatory comparison", Agricultural Finance Review, Vol. 78 No. 4, pp. 396-411. https://doi.org/10.1108/AFR-08-2017-0075
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