Agricultural Debt Continues to Increase

Agricultural debt on a nominal basis in Illinois has been increasing since 1991. Nominally, agricultural debt reached a peak in 1984 of $188.8 billion (see the nominal line in Figure 1). From 1984 through 1989, agricultural producers retired debt and agricultural lenders wrote off some debt, resulting in a decline in total debt. By 1989, agricultural debt had declined by 31%, reaching a level of $131 billion. Since 1990, agricultural debt increased an average of 4.1% per year. The rate of increase varied from year-to-year but exhibited no escalating or decreasing trends. The highest rate increases occurred between 2006-2007 and 2013-2014 when increases were 11.6 and 9.5%, respectively. Increases of less than 3% occurred nine times in this period while decreases happened in 3 years with the greatest at negative 3.2% in 2002-2003.At the end of 2004, agricultural debt reached $197.6 billion, surpassing the previous high set in 1984. Increasing debt levels may cause concerns that financial stress occurring during the 1980s may repeat. However, the above debt levels are stated in nominal terms and do not take into consideration inflation’s devaluing impacts on the dollar.Using the gross national product – implicit price deflator to state nominal debt levels in terms of 2018 dollars gives a different picture of debt levels (see the real line in Figure 1). In terms of 2018 dollars, agricultural debt started at $421 billion in 1980 before declining until 1994. Since 1993, agricultural debt in real terms increased all but four years 2000, 2003, 2012 and forecasted for 2018. Since 1990, the rate of increase averaged 1.8% for real debt levels, much lower than the 4.1% nominal rate increase.  The forecasted numbers for 2017 and 2018 are the highest levels in real terms since 1984