Most often people wonder why do farmers get into debt, in this guide, we will cover the reasons behind farmers get into debt and also answers How do farmers get into a debt trap, why are the small farmers caught in a debt trap
Farmers mostly take crop loans at the beginning of the start of the season and repay the loan after crops are harvest.
Farmer’s plays an important role in our daily life’s as well as help the country as a whole hence improving self-employment.
However, the failure of the crop to produce well makes loan repayment impossible. So, the farmers have some options like selling a part of their land to repay the loan.
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Farmers crediting in such a condition pushes the borrowers or the farmers into a situation from which recovery is painful hence the farmers get into the debt trap.
Another reason why do farmers get into debt is that Farmers may borrow or take loans to buy farming equipment for farming.
And every year, farmers often borrow or take a loan to get:
- pesticides and
- Fertilizer to sow their crops.
They have to always imagine what their crops will be worth when harvest or ripe, but meanwhile the farmers most often earn less than what they expected, making it difficult for them to pay off that year’s borrowing or loans.
Also, farm technology keeps on improving and crop farming and meat yields keep going up. So the real value of crops farming tends to fall due to competition. This means that some farmers get into debt and are not able to settle it because they can’t keep up with the farming competition, or on the other hand, the farmers need to invest in better technology which will also still call for another loan resulting in dept.
Farmers also have not continuous or steady paydays, and perhaps only once a year after they sell their crops, hence borrowing or loan is very important for farmers to help them over between paydays. It’s not even or balanced in shape or arrangement. If there’s a prolonged period of abnormally low rainfall leading to a shortage of water they may miss a year or more making loan payment hard for them.
Very stressful and the young are not fancying that sort of life, so the average age of a farmer is 58.[not sure which country, possibly Australia]
How do farmers get into a debt trap?
Farming is such an expressing adverse industry to our society and economy, something has to be done about it to provide more year-round support.
Governments can also help by giving each one of farmers a stipend and get it used to improve and help them in their land which will enhance them to stop clear-felling and build-up of fuel loads. The reason is that they don’t have trash their land in order for them to put in a crop that likely will die.
Why are the small farmers caught in a debt trap?
Despite efforts by the government the country is doing or has done to stabilize prices, farming is not generally profitable.
Much large number of farms is small family farms which are land-rich but having taken on too much debt in terms of equipment and investment.
Meanwhile, their only source of revenue or income is food or dairy or crop harvesting which is done yearly, and their only wealth island and small farms, in particular, have a negative or little net worth.
How do you avoid a debt trap?
The best way to avoid debt traps is to know to agree with what has just been said, what your terms are by reading your agreement very much to understand it and to pay your bills on time.
Overdraft protection programs can be helpful to farmers as well, but an overdraft is never free, and they can send the farmers further into debt.