Ag Lender Survey Shows Lower Profitability and Higher Concerns

The American Bankers Association teamed up with Farmer Mac for their Fall 2019 Ag Lender Survey.  The biggest takeaway from the report is that the agricultural economy and farm income remain under stress, with little if any signs of improvement ahead in 2020.  Over 82% of lenders in the survey said farm profits were being squeezed this year, with every region in the survey reporting profitability declines in their respective areas.

The top concerns for producers in the survey included income, liquidity, and leverage, but trade, tariffs, and weather moved up on the list.  The top concerns for lenders included credit quality, competition for loans, as well as weaker loan demand.  Lender sentiment remained cautious between August of 2018 and August of 2019. A similar percentage of lenders reported farm profitability declines, increasing farm leverage, and increasing loan default rates.

Dairy, grains, and cattle were the sectors that gave lenders the most concern, while they were less concerned about the swine, poultry, and vegetable sectors. Survey respondents generally expect higher loan delinquency rates going into 2020 for both production and real estate. In spite of quality concerns over credit, lenders remain positive about approvals.

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