According to the Federal Reserve Bank of Kansas City, US farmers’ spending and incomes have dropped for a seventh quarter in a row, along with a sharp jump in loan volumes, due to diverging crop revenues and planting costs. The U.S. Department of Agriculture calculates that 2015 US national net farm income will fall to its lowest since 2009.
Additionally, the strengthening U.S. dollar is also weighing on international sales.
A stronger dollar has meant that “imports, such as fertilizers and seeds, have become much more expensive for farmers in many regions of the world,” Stefan Vogel, head of agri commodity markets research at Rabobank, told the FT. “The overall situation has worsened over the past two years and they will cut back on what they can.”
Some agribusinesses are already feeling the pain. For instance, Deere & Co (NYSE: DE) revealed a 30% plunge in half-year earnings this year, with a 17% decrease in sales. DE makes up 6.9% of MOO and 8.2% of VEGI.
Market Vectors Agribusiness ETF
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Max Chen contributed to this article.