Weak crop prices and a dramatic decline in livestock prices lead to a decrease in the 2015 farm net income, according to an economist from the Federal Reserve Bank, Nathan Kauffman.  Since 2013 farm income has actually dropped by 55 percent, Kauffman recently told attendees of the American Farm Bureau Federation‘s 97th Annual Convention and IDEAg Trade Show.

“I don’t have the best of news to share this morning,” Kauffman said. The “sky is not falling,” he added, “but this is definitely a period of adjustment.”

The oddity is that the decline in income has not been followed by a decline in land values.

“Farmland values have, in many ways, defied expectations associated with lower crop values,” he said.

A gradual buildup of corn, soybeans and wheat in the global supply chain is one of the reasons for the lower commodity prices.  “Global inventory is very, very high,” he explained.

At the same time, key demand factors have also “softened significantly,” he said, specifically mentioning ethanol production, which has been nearly flat in the past few years, and U.S. exports to China, which have decreased steadily as growth has slowed in that market.

An additional factor is credit conditions, which have deteriorated in the past two or three years. A strong dollar, coupled with a somewhat sluggish global economy, has made selling crops overseas more difficult, he added.

Land values have stayed high, in part because of the lack of land on the market, but prices can very depending on the quality of the land. Marginal ground is seeing some decreases, but high-quaily land is still very much in demand. Rented ground has also been slow to follow the decrease in crop prices.

“It’s not what you would have expected when corn drops from $6 (per bushel) to $3,” he said.