Many in the farming community consider the 1980s the low water mark in American Ag. But after several years of low commodity prices and the number of small farms calling it quits, many are wondering if we’re headed for a new 1980s.
Shan Hanes, Chairman of the American Banker Association says the current climate is very different then what we saw a few decades ago. First he said farming is not dealing with the high dollar land transactions, and the amount of Real Estate debt.
“But the other side of that, we were also in the 80s, with the time moving forward of lowering interest rates, and so banks and customers could restructure and refinance and so the combination of longer terms and lower rates actually helped cash flows. And so, coming out of those 80s, a big part of that was restructuring over longer terms with lower rates.”
But Hanes said he is concerned now, because the farming community is doing the exact opposite.
“We can still restructure, but rates are higher, and between rates increasing and the risk of that credit increasing, both of caused a higher rate, so I’m actually very concerned about that. And I will say I think banks as a whole have done a much better job of analyzing credit, have done a much better job of doing cash flows and so I feel we are better prepared to handle the 80s. I think we’ll be able to recognize it.”
Hanes noted while the banking industry will recognize problems similar to the 1980s quicker, and hopefully stave off major problems, it does not change the fact that farmers need money to repay loans.
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