With the fortunes of flashy young companies such as We Co. and Peloton stealing headlines, it may be easy to forget about the worsening economic condition of flyover country, USA. That would be a mistake.
Regional economic indicators suggest that the financial health of the Midwest is waning, as trade tariffs start to take their toll on sectors from farming to manufacturing. The implications for the U.S. economy at large are significant.
One heartbeat of the Midwestern economy, farming, has been under serious pressure throughout the spring and summer. Agricultural exports to China have plummeted over the past two years, particularly soybeans. While a wet planting season kept crop yields in check, the lack of crop buyers has kept prices for soybeans and corn under pressure, too, which has been a double whammy for farmers.
As a result, farmers are starting to get into real financial trouble. Loan delinquencies and bankruptcies are rising, according to data aggregated by the American Farm Bureau Federation. For the first quarter of 2019, 2.5% of commercial real-estate loans in agriculture were more than 30 days past due, up from 2.1% in the prior quarter, which is also the historical average. Delinquencies on nonreal-estate loans in agriculture held by commercial lenders are rising, too, and above the historical average.