chapter  3
The Current Situation of the Farm Sector
WithLance McKinzie, Timothy G. Baker, Wallace E. Tyner
Pages 12

Real net farm income for the sector, that is, net income adjusted to allow for inflation and variations in the value of the dollar, fell rapidly through the mid 1950s, continued to fall but more slowly during the 1960s, and skyrocketed during the early 1970s. Besides adding significant new wealth, the sector appears to have improved its profitability. However, that claim requires caution. Economists can choose among several approaches to measuring profitability. Looking at any one of these factors, such as, net farm income, profitability, changes in asset values, real cost of debt, can distort our view of the farm financial situation. The combination of new wealth and higher real income to assets, compared to pre-boom levels, makes farmers with very low, or no, debt better off. The greater the debt and the higher the interest, the worse off the farmer, unless he is earning an exceptionally high rate of return on assets.