With farm income continuing to erode, banks are making more farm loans to ranchers and farmers, according to the American Bankers Association.
In 2015, farm banks upped their lending by 7.9%, holding just more than $100 billion in farm loans at the end of last year.
Much of that borrowing comes from smaller loans ($500,000 or less), which are typically taken out by smaller farm operations.
“Banks reported holding nearly $75 million in small farm loans with $20 billion in micro farm loans (of $100,000 or less) at the end of 2015,” ABA’s 2015 Farm Bank Performance Report said. “The number of outstanding small farm loans totaled 1.2 million, with the vast majority—more than 790,000 loans—under $100,000.”
So far, farm banks are weathering the additional demand for debt, according to the ABA. “Farm banks have reported improved asset quality, strengthened balance sheets and solid earnings in 2015,” the report said. “In addition, farm banks, as a group, remained well capitalized through 2015.”
But lenders are paying close attention to the farm economy and the challenges producers are facing in 2016, as evidenced by the Kansas City Federal Reserve Bank’s fourth-quarter report on agricultural credit.
“Getting farm operations to cash flow for 2016 will be a big challenge,” admitted one Missouri banker.
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What are you hearing from your banker? Let us know in the comments.