Nov 13, 2019

A new crack in the farm economy

By: Ryan McCrimmon

A NEW CRACK IN THE FARM ECONOMY: With weather challenges, trade tension and long-term financial headwinds buffeting the ag sector, more farmers and ranchers are taking on high-interest loans beyond the usual ag lenders just to stay in business, The Wall Street Journal reports.

Traditional farm banks are offering less money and placing tighter restrictions on loans, forcing cash-strapped farmers to look elsewhere for capital. Financial services providers that are less regulated can offer a lifeline to desperate producers — but those same loans can prove treacherous for farmers that fall behind, with interest rates twice as high as those from standard farm banks.

“If you don’t make a crop and you have a bad year, they’ll clean your clock,” said Heath Jobe, an Arkansas farmer who filed for bankruptcy after he lost a recent crop due to dry weather. Jobe said his loan payments with 9 percent interest had started piling up and his request for a new loan was rejected.

Producers have increasingly been falling behind on their loans this year, squeezing ag lenders and threatening to send the rural economy toward a full-blown meltdown after years of pressure, as POLITICO reported in June. Farmers are expected to hold nearly $416 billion in debt this year — the most since the farm crisis in the 1980s.

Dive deeper: The American Bankers Association and Federal Agricultural Mortgage Corporation released a survey of ag lenders on Monday. Among the findings: About 57 percent of farm borrowers were profitable in 2019, but 82.5 percent said their profits were declining. Dairy, livestock and grains were seen as the most concerning sectors.

The bottom line: “The agricultural economy and farm income remained stressed in 2019 with limited signs of improvement in 2020,” according to the report. Read it here.

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