Skimming through the mainstream media websites, one would find numerous articles decrying the plight of US farmers caught in the middle of the US-China trade war, such as these: "Farmers’ Despair Pushes States to Act", "Farm Bankruptcies Rise Again", "Amid Trump Tariffs, Farm Bankruptcies And Suicides Rise." However, there may be more here than meets the conventional eye.
As Commodore Research managing director Jeffrey Landsberg writes, US farm income in 2019 is on pace for the highest income seen in six Years. This, Landsberg continues, "is very significant as US farmers are not faring nearly as poorly as many pundits and media outlets continue to state. As a result, US farmers collectively have not been in any real uproar and are not jeopardizing Trump’s re-election chances."
The surging farm net income stands in stark contrast with the documented spike in bankruptcies, which has prompted some to whether this is a case of a handful of farmers pocketing the majority of the upside, or merely more farmers taking advantage of the political climate and filing bankruptcy for insurance or other tangential purposes.
We present Commodore's full note below:
Extremely noteworthy to us is that the United States Department of Agriculture recently announced that US net farm income this year will climb to its highest level since 2013. This is very significant as US farmers are not faring nearly as poorly as many pundits and media outlets continue to often report. As a result, US farmers collectively have not been in any real uproar and are not jeopardizing Trump’s re-election chances.
US net farm income this year is on pace to total $92.5 billion. This would mark a year-on-year increase of $8.5 billion (10%) and would mark the highest income since 2013’s record $123.7 billion.
Federal government direct farm program payments are contributing to a large amount of the income. Federal government direct farm program payments are expected to end this year at a very robust $22.4 billion, which is $8.7 billion (64%) more than was issued in 2018.
This includes the Market Facilitation Program payments, which is the official name for President’s Trump tariff payments that are going to farmers to make up for the weakness in exports. The $22.4 billion in federal government direct farm program payments marks a record for this decade (and includes $14.5 billion in Trump’s Market Facilitation Program payments).