Farm debt to asset ratios continue upswing
The USDA says farm sector debt-to-equity and debt-to-asset ratios are expected to continue climbing.
The USDA Economic Research Service (ERS) forecasts a debt-to-equity ratio of 15.7 percent in 2020, and a debt-to-asset ratio of 13.6 percent.
Both ratios have been climbing since about 2012, but are still much lower than in the mid-80s when the debt to equity ratio percentage peaked in the high-20s and the debt to asset ratio percentage was in the low-20s.
Higher ratios indicate that more of the farm’s assets are financed by credit or debt relative to owner equity. It’s the result of farm debt growing at a faster rate than farm assets.
The ratios measure the farm sector’s risk exposure and ability to overcome adverse financial events. The impact of this year’s shelter-in-place restrictions due to COVID-19 are not reflected in this ERS data.