Farm Debt-to-Asset Ration Forecast to Stabilize in 2017-1806/18/2018
The debt-to-asset ratio compares the farm sector’s outstanding debt relative to the value of the sector’s aggregate assets.
An indicator of the farm sector’s level of risk exposure, this ratio provides a measure of the sector’s ability to repay financial liabilities (debt) via the sale of assets.
A lower debt-to-asset ratio indicates fewer assets are financed by debt and suggests the sector would be better able to overcome adverse financial events.
After reaching a low of 11.3 percent in 2012, the debt-to-asset ratio increased gradually to 12.7 percent in 2016 as the growth rate for debt exceeded the growth rate for assets.
ERS forecasts the debt-to-asset ratio to remain relatively unchanged in 2017-18, as farm sector assets stabilized at $3.1 billion (adjusted for inflation) between 2016 and 2018.
Still, the ratio remains well below the peak in 1985 (22.2 percent) as farm sector asset values have nearly doubled since 1985.
About 80 percent of the value of farm sector assets is attributable to the market value of farm real estate assets, which increased 115 percent from 1985 to 2016 and is forecast to increase 2 percent in 2017 and remain flat in 2018.
This chart uses data from the ERS data product Farm Income and Wealth Statistics, updated February 2018.