It has been an interesting year for agriculture, but now that producers and ag bankers are shifting their mindset to 2017, conversations will be tougher heading into the new year.
Alan Hoskins of American Farm Mortgage said the health of the ag economy can be summarized with one word: caution.
“I think producers are getting back to really looking at the profitability effect on their management decisions,” said Hoskins. “That’s a positive. We needed to see that come back into play.”
There is a level of concern going into 2017, as roughly 25 percent of producers are experiencing negative cash flows this year.
Farmer Mac, a group that partners with rural lenders, said while it’s not a time of prosperity, we aren’t seeing a complete collapse of the ag economy like the 1970s or 80s.
“Where the current income levels are shaking out, we’ve experienced not too long ago, maybe the early 2000s,” said Jackson Takasch of Farmer Mac. “It’s not like we’re way out of the realm of experiences of what they’re experiencing today. They’ve experienced these levels before, just not in the last 10 years.”
According to Takach, there was an expectation to see more of a response with delinquencies, however banks haven’t seen that happen.
“I think that speaks very loudly to how much financial strength farmers had built up during the good years, how much they saved, how much liquidity they had on the farm,” said Takach. “It wouldn’t surprise me if 2017 turned out better than expected.”
There was an uptick in the Farm Credit System and ag bankers’ delinquency numbers, but Takach said it’s been small compared to prior eras of similar economic downturns.
Another beneficial lesson to take out of the situation today is what it will teach younger farmers in weathering severe economic headwinds.
“If everyone could go into farming and make money every year, it would be a whole different ballgame,” said John Gehrke, president of the national Association of Credit Specialists. “I think it’s going to come down to how long they’re willing to stick it out and how long they’re willing to go to be a survivor in this business.”
Lenders are stressing the need for communication with all partners of your farm, everyone from lenders to input providers.