It's no secret that U.S. farmers and ranchers are the most efficient in the world — the challenge comes when U.S. production outpaces consumption. In 2016 alone, the rate of growth of U.S. production of corn, soybeans and wheat vastly outpaced the rest of the world, says Cortney Cowley, agricultural economist at the Omaha branch of the Federal Reserve Bank of Kansas City.

"We've consistently been producing more than we can consume, because production has been growing at a faster rate than our consumption can keep up, so we need somewhere to go with that product that we produce," Cowley told the audience at the recent Ag Business Economic Symposium at NCTA in Curtis. "Luckily, for the most part, the rest of the world is consuming more than they produce."

That means opportunities in export markets. Last year, in particular, saw a boost in corn and soybeans. Soybeans saw a 135% increase in exports in August, according to the USDA Foreign Agricultural Service. Likewise, beef exports were relatively strong in 2016. Despite this increase in exports, U.S. inventories continue to rise. "This reflects the continued disparity between production and consumption in the U.S.," Cowley says.

These factors point to a likely continuation of lower prices, and that's reflected in the financial situations on many farms.

Recent surveys of farm lenders conducted by the Federal Reserve have indicated that farm loan repayments in general have declined in recent years. "In the past, we have had periods where we've had higher loan demands or higher farm debt, at the same time we've had lower farm income and lower repayment rates," Cowley says. "What's concerning about the current climate is the length of it, the intensity and the gradual persistent decline in some of these conditions."

While there was a slight uptick in the amount of farm loan delinquencies in 2016, loan delinquencies are still less than 2% of the total farm loan base in the entire U.S., according to data reported to the Federal Reserve.

There's another bright spot in ag economy: Debt to asset ratios aren't increasing as much as they were in the 1980s. On a national average, there has been a 5% increase in farm debt for 2016. However, farmland values have only slightly declined. Farmland values in the Federal Reserve District 10 — Nebraska, Kansas, western Missouri, Oklahoma, Wyoming, Colorado and northern New Mexico — have declined about 5% year over year in 2016.

Using farmland values as a proxy for assets, Cowley notes, "Even if we continue those trends and everything stays at a steady state, we still wouldn't reach this concerning 20% debt-to-asset ratio until after about 2020," she says, adding, "There's a lot that can happen between now and 2020."

That's largely due to lower interest rates relative to the 1980s and land values holding relatively steady. Also, in 2012 to 2013 many producers took advantage of higher farm incomes and paid off debt.

"A lot of what triggered the 1980s was a significant decline in farmland. Right now, we haven't seen farmland come down as quickly or as much as we'd expect," Cowley says. "There's also much less debt across agriculture than what we had then, all coming together to give us much lower debt-to-asset ratios across the board. Producers did a really good job when farm incomes were high to work with bankers to draw down their debt, and that prepared them for the next cycle."

Meanwhile, cash rents have come down 5% to 10% year over year as of 2016 throughout the district. Most farm production costs also declined in 2016, especially fertilizer. These conditions could spell opportunity in a lower cost of entry into the ag business for young and beginning producers.

"If I'm a young and beginning producer, I would much rather get into the business when prices are low than when prices are high," Cowley says. "Things have been more difficult through this downturn for young and beginning farmers, but I think moving forward, a lower cost of production could be an opportunity for those producers, especially if we start seeing more of the older generation transitioning out of agriculture."

Export markets also hold promise for producers, and that's especially the case for protein.

"Looking at countries in Southeast Asia, the rate of the growth and demand for ag products, specifically protein is a major opportunity for the U.S.," Cowley says. "Continuing to maintain a relatively high-quality product on the global scale, despite a stronger dollar, can definitely help have a competitive advantage."