Roughly two-thirds of the nation has been in a severe drought since last summer. The Federal Reserve Bank of
The Federal Reserve's report looks at numerous factors that will influence farmers' financial health and how much farmers will make in 2013.
The consequences of the drought go beyond dollars and cents. Many farmers have said they would prefer to be able to grow and harvest their crops even if it means lower net income.
The Federal Reserve said farm profits may wind up lower this year, but that would help livestock producers because their feed costs would be lower. In the past two years, livestock producers have struggled to earn a profit because of high feed costs and the drought.
Current market prices suggest corn and soybean prices could be 10 to 15 percent lower by next fall. That would happen if weather conditions improve and farmers harvest a strong corn crop.
Corn prices have been high for several years because supplies remain tight amid strong demand from the ethanol industry, livestock producers and international buyers.
The Federal Reserve said that if the drought continues into this year's growing season, farm income will likely be strong again. In drought, crop supplies would remain tight, so prices would be high.
Most farms are in good financial shape to withstand the drought because they have little debt and farmland values have increased.
The Federal Reserve said the current debt-to-asset ratio for farmers is 11.7 percent. That's much better than in the 1970s when that ratio was 20 percent. The higher debt levels in the past contributed to the farm crisis of the 1980s.
But the Fed cautioned that much of today's farm debt may be concentrated at a small number of farms, so farms with high debt could still have problems. For instance, about 6 percent of
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