Bankers Report Ag Lending is Stabilizing

December 19, 2017 03:07 AM
 
Money

Data from the Federal Reserve Bank of Kansas City shows lending at agricultural banks stabilized in the third quarter of 2017, but bankers have slightly increased their risk ratings on new non-real estate loans. This latest data reflects the financial stress on farm operations prompted by the sharp drop in net farm incomes. It also suggests ag bankers and their borrowers are working through the difficulties, reducing the likelihood of a rash of farmland foreclosures like agriculture saw in the 1980s.

Demand for Farm Operating Loans Remains High

 

Operating loans have accounted for nearly 60% of the total volume of non-real estate farm loans during the past four quarters, the highest in the 40-year history of the survey. Conversely, the share of other loans has fallen to levels last seen in the early 1990s.

Rise in Risk Levels on New Loans

In the third quarter, the share of non-real estate farm loans classified as “special mention” increased four percentage points from the previous year and the share of loans classified as “minimal risk” declined about two points. Although the share of loans classified as “special mention” continued to increase in the third quarter, nearly 90% of farm loans still were assigned a rating of “acceptable” or better in the third quarter, suggesting financial conditions have deteriorated only modestly.  

 

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Comments

 
Spell Check

C.K
bad axe, MI
12/20/2017 07:00 AM
 

  The FED doesn't take into account all the credit that is being pumped into farm country buy lenders that don't report there accounts to a reporting agency , what I mean buy that they don't do UCC reporting on them so it doesn't show up on a credit report. If it did most farmers wouldn't be able to get a operating loan, FarmPlan , all your seed financing , local elevators, and large national ag retailers don't report to credit rating agent. This is where all the farm debt is in these off the radar accounts.

 
 
Craig
Kearney, NE
12/20/2017 07:47 AM
 

  Ultra low interest rates are masking the growing financial problems down on the farm. Also, C.K. makes a good point that there are many secondary sources of Ag financing that weren't available in the 1980's. If those aren't being properly accounted for, the true nature of Agriculture's financial "health" is also being hidden. With current prices, no one is keeping up with the inflation that has been/is going on in the non Ag economy of the U.S. We are simply dying at a slower rate than in the 1980's. However, we are still dying.

 
 
IA Ag banker
eastern Iowa, IA
12/20/2017 10:22 AM
 

  35 + yrs of Ag Banker, I'm the only one to see under the skirt of new paint, new houses, new barns new farms etc. and under the skirt there is a lot of blood. The lack of liquidity in Agricultural producers will be their undoing. Look at Farm Credit America Financial reports, Their 9/30/17 report showed that over 25% of their non real estate loans were considered Not acceptable. Overall they report 15.% of their portfolio is consider not acceptable. And there is a never ending struggle within an organization that big where the field people try to keep as many problems hidden from upper management. Same thing happened in the early 80's. When the sales people lose their overall power and the credit people take it back, Look out below because we have a long way to fall for land values to go and once the land equity drops the creditors will quit rewriting your operating losses back into your real estate loans.

 
 

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