Farm debt to asset ratios continue upswing

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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.

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