A survey by the American Bankers Association shows nearly 90 percent of agricultural lenders have seen a decline in overall farm profitability in the last 12 months. Ninety-five percent of the lenders in the survey expressed concerns about low commodity prices, especially in grains, beef cattle, and dairy. Grains are the biggest concern as 80 percent of lenders gave it a four out of a possible five rating. Grains are followed by beef cattle, dairy, swine, poultry, and vegetables, with fruits and nuts the least concerning sector of ag. The decline in commodity prices led to a fall in farm income with tighter profit margins. Ag lenders in the survey say roughly 60 percent of their clients were profitable in 2016 and expect 54 percent to be profitable this year. Lenders are also concerned about land values. They say 44 percent of average quality land and 33 percent of cash rents are priced above fair market value in their particular area.
Ag lenders also expect greater demand for debt financing thanks to lower cash levels on farms. Sixty-six percent of the respondents expect greater demand for operating loans, and 33 percent expect more demand for ag real estate loans.
Source: NAFB News Service