illustrates the general expansion of farm machinery (tractors, combines, and other machinery and equipment) and motor vehicles (for business use) during the 1970s, when farmers modernized and expanded their farming operations.
The squeeze on real net farm income and rising interest rates in the 1980s and problems of insolvency(debts exceeded assets) for many farmers caused the annual real investment expenditures for farm machinery and motor vehicles fell by more than one-half,from $6.3 billion in 1997 to about $2.4 billion in 1989. The upturn in real net farm income in the late 1980s began to turn this trend around again, however.
These expenditures, of course, represent the revenues received by John Deere and other farm machinery and motor vehicle manufactures and the level of sales activities at merchants and dealers in rural communities throughout the country.
Figure 18.8, B shows a similar trend in the purchases of non durable farm production inputs and services during the year. There was a marked expansion of variable production input use during the 1970s, when the sector modernized and expended, and an equally marked contraction during much of the 1980s, when farm profits squeezed when the cost of borrowing to purchase these inputs rose.
These expenses of farmer also represent the volume of sales activities of rural businesses and farm input manufacturers.