Bernstein’s Oxgaard sees break-even net incomes for 2019
Says dairy industry is boosting delinquencies, bankruptcies
Corn and soybean growers in the U.S. aren’t doing so bad, according to at least one agricultural analyst. But dairy farms are in trouble.
Net incomes for crop farmers are now in-line with the 30-year average, and prices are close to where they were before the U.S.-China trade war began, said Jonas Oxgaard, an analyst at Sanford C. Bernstein in New York. Meanwhile, widely reported weather losses have been primarily covered by insurance, he wrote in a note.
There is a rise in delinquencies and bankruptcies, he said, but it’s largely attributable to dairy farming, with the highest number of bankruptcies in Wisconsin, which produces 14% of U.S. milk. The large grain producing states aren’t heavily represented. The result: These rates shouldn’t be used as an investment guide for seed sellers and other farm product companies, he suggested.
“Rather, look at expected farmer net income, which we believe will be maintained at breakeven rates for the foreseeable future,” Oxgaard wrote.
Oxgaard’s comments come just weeks after the U.S. revised its forecast for farm profits, predicting a 5% rise in 2019 once the Trump administration’s $19.5 billion direct farm aid program — designed to lessen pain from the U.S. China trade war — is figured in.
While the revised USDA forecast suggests farmers will have their most profitable year since 2014, the numbers are still 2.3% below average farm profits since 2000, and almost 30% below their net income in 2013.