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Will Bankers Stand With Farmers During Drought?


As crop prospects worsen and livestock production costs soar, many farmers are looking at a lot of red ink on their financial balance sheets. Cash on hand for the next few months and funds to put out a crop next year may be in short supply. As a result, producers will need the support and understanding of their bankers in order to survive.  It is a situation that farmers have found themselves in before; but, for some farmers, it is different this year. Record high grain prices and several good years of crop revenue have most corn and soybean farmers in good financial shape coming into the 2012 year. “Nobody want to have a year like this, but crop insurance will help most of the corn and soybean growers survive,” said Steve Allard, Vice-President of Farm Credit Services of Mid-America.  He told HAT that the real losers in the year’s drought are livestock producers, “I think we will see the biggest impact on livestock farmers who are seeing their feed costs go up and the price of their animals go down.” He added that, unlike grain farmers, the past few years have not been financially robust so these producers may not have the resources to handle the crisis.


He urged producers to say in close communication with their bankers, “Lenders have several tools in their tool box including extending lines of credit, deferring payments, or restructuring loans.”  He said the key to survival will be liquidity.  He indicated that those operations with good debt to asset ratios will find their lenders more willing to work with them.


While in most cases Allard felt lenders would be willing to work with producers, he admits for some the road ahead will be rough, “It is important that they talk with their banker because there may need to be some very difficult decisions made in the next few months.” The government livestock emergency program would have provided some relief to producers, but that program expired last year and a new Farm Bill has not been passed to reauthorize the program for 2012.


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