The number of farm businesses that are highly leveraged has fallen since 2015, but is forecast to increase slightly this year. Farm businesses accounted for more than 94% of U.S. farm sector production in 2017. That year, farm businesses held 90 of all farm assets and 96% of farm debt. However, the USDA forecasts 4.3 percent of crop farm businesses to be very highly leveraged, the highest share since 2002.
USDA Economic Research Service defines farm businesses as operations where farming is reported as the operator’s primary occupation or that have at least $350,000 in annual sales. Farm businesses specializing in crops tend to have higher shares of both highly and very highly leveraged operations than farm businesses specializing in livestock and animal products. Debt-to-asset ratios can indicate a farm’s risk exposure and ability to overcome adverse financial events.
Forecast to Increase USDA says Lending institutions consider debt to asset ratios when evaluating credit worthiness of farms, adding highly leveraged farm businesses may have difficulty securing a loan.
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