News

Farm income drop results in less capital spending

Many farmers have responded to declines in income by reducing capital spending.

“There just isn’t much left to make capital expenditures,” said Dr. Michael Langemeier, professor in the Department of Agricultural Economics at Purdue University’s Center for Commercial Agriculture.

The dip in farm income since 2013 has resulted in reduced spending for machinery, equipment and buildings, according to Langemeier.

“Machinery that’s on the farms is depreciating faster than our ability to replace it,” Langemeier told Brownfield Ag News Monday.  “That does occur during times of relatively low income, but eventually that has to reverse itself, because eventually you have to replace that equipment that’s depreciating.”

Net farm cash income is down about 29 percent since its most recent peak in 2012.  For the next couple of years, Langemeier expects little change in farm income and capital spending, but he projects improvements later.

“As net farm income is expected to increase, maybe three to five years out, I would expect capital expenditures to increase,” said Langemeier.

From 2014 to 2016, the drop in capital spending was almost 35 percent, he said, but it’s leveled off in the past year.

AUDIO: Michael Langemeier (7 min. MP3)