Financing a Changing Agricultural and Rural Landscape

The agricultural economy is in a constant state of adjustment, having undergone several major adjustments over the last 40 years ranging from the farm financial crisis of the early 1980s— a relatively long period of stability and low to moderate levels of profitability—to a period of high profitability from 2007 through 2014, to a recent period of low profitability with average net farm income for some Midwestern states close to or below zero. During this period, the number of farms in the United States has declined and average farm size has steadily increased. Similar consolidation has occurred in the agricultural lending industry; specifically, with commercial banks and in the Farm Credit System. Wheelock and Wilson (2012) state that from 1984 to 2008, the number of commercial banks fell from 14,482 to 7,086. In addition, the number of Farm Credit Associations decreased from 304 in 1990 to 77 in 2017 (U.S. Department of Agriculture Economic Research Service; Farm Credit Administration). The decrease in the number of farms has also coincided with consolidation of the firms that provide inputs to or purchase outputs from farmers (Saitone and Sexton). Langemeier and Boehlje discuss the drivers of consolidation occurring in production agriculture and the agribusiness industry.