Thursday, February 26, 2015

Some Economic Wisdom on the (Forecasted) Decline in Farm Income

Brent Gloy and David Widmar have a new post up on their blog Agricultural Economic Insights entitled "Declining Net Farm Income; The Story with Two Possible Headlines." The post has, quite deservedly, gone viral. This sort of level-headed commentary serves to counteract a lot of the doom and gloom one typically reads when negative forecasts come out.

The gist of their article is that, while the decline in income seems dramatic when considering the last five years or so, it fits very well into the long-run picture. In terms of inflation-adjusted net farm income, 2015 is projected to be very close to the long-run average. The correction we're likely to see in 2015 will be painful for many, but Brent and David show that this is really just a correction from a high profit period to a period of normal profits.

Brent and David also discuss the percentage changes in net farm income over the long run. The changes we've seen recently and are likely to see for 2014 and 2015 are right in line with the variability we've seen since at least the 1970s. As they point out, the projected decline in profits for 2015 is similar to the declines we saw in at least 3 of the last 15 years. None of this is intended to minimize the difficulty many communities will endure, but it's important to keep these things in perspective.

Like everything else I've read on Agricultural Economic Insights, the post is certainly worth a read as Brent and David do a very good job fleshing all this out. 

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