Bruce Jones, Extension Agricultural Economist
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
First audio in a series produced in concert with the Wisconsin Agricultural Outlook Forum Thursday, Jan. 21 on the UW-Madison campus. Registration costs $15.00 and covers both the lunch and the forum. For more information and to register, visit: http://agoutlook.cals.wisc.edu/
3:03 – Total Time
0:16 – 2015 Wisconsin farm income down
0:33 – It could be worse
1:13 – Farmers still in the black
1:52 – Less money to spend
2:29 – Loss to state
2:54 – Lead out
Sevie Kenyon: Wisconsin agriculture in review. We’re visiting today with Bruce Jones, Department of Agricultural and Applied Economics, University of Wisconsin-Madison in the College of Agricultural and Life Sciences and I’m Sevie Kenyon. Bruce, start out, what kind of year did farmers have in 2015?
Bruce Jones: Well 2015 was not nearly as good as 2014 was. Prices of milk fell down to below 20, grain prices continued to stay low, so that translated into much lower income than we enjoyed in 2014.
Sevie Kenyon: Bruce, can you give us an idea of the differences?
Bruce Jones: Well, we’re going to be down when the final tabulations in, about $2 billion net farm income below what we were. Almost all of that decline in net income can be attributed in this year to milk price decline. It was not unexpected, we knew that we were sailing at a pretty high altitude in 2014 with $24 milk; we knew that we were going to be moving down to the 17 dollar range. So the $2 billion swing in farm income is not surprising. It’s not necessarily what we wanted to see, but it’s something we were expecting.
Sevie Kenyon: What kind of shape are the farmers in after a year like this?
Bruce Jones: The good news is that coming off the strong earnings years of 2011, 2012 and 2013 and 2014, farmers were able to build equity, retire debt and they had very strong balance sheets. Debts are low, equity holdings are pretty high and by in large there is a lot of borrowing capacity out there if farmers should choose to use it. Now they’re going to be in a situation where they’re going to tap some of those reserves either by drawing down cash or borrowing a little bit of money. For the most part, because of the strength of the balance sheets, farmers should be able to do that.
Sevie Kenyon: You mention that as good news, what was the bad news?
Bruce Jones: The bad news was the decline in income. Let me stress one thing, we’re still in the black, it’s not like we went into a loss, rather we just saw a sizable reduction in net farm income. We’re back into levels of income that we saw back in the early 2000 era. We made do with this, it may not be as pleasant as it was when we were looking at high incomes, but we’re in the black, it’s just that we don’t have as much profit to utilize and start using to build reserves and pay debt.
Sevie Kenyon: Bruce, maybe I can get you to speculate a little bit. What does the loss in income mean to the state?
Bruce Jones: If you don’t have income, you don’t have disposable income. If you don’t have disposable income, you don’t go out and make perhaps the machinery investments you would have made. It means you’re going to start to make do with less. So it’s going to probably be a bit of a drag on the state economy or put it another way, it’s not going to be quite as much as a catalyst for economic activity as it was the last couple.
Sevie Kenyon: We’ve been visiting with Bruce Jones, Department of Agricultural and Applied Economics, University of Wisconsin-Madison in the College of Agricultural and Life Sciences and I’m Sevie Kenyon.