Concerns about commodity prices, liquidity and farm income are top-of-mind for the nation’s agricultural lenders, according to a new survey by ABA and Farmer Mac. Lenders said they were most concerned about the prices of grain, beef cattle and dairy.
Declining commodity prices have contributed to a fall in farm income, lenders said, with 90 percent reporting an overall decrease in farm profitability in the last year. Despite that, however, lenders reported that 60 percent of their current ag borrowers were profitable in 2016, and that they expect 54 percent to remain profitable in 2017. More than two-thirds said they expect to see an increase in operating loans in the first half of 2017 as a result of lower levels of cash.
When it came to their own institutions, ag lenders said that they were most concerned about regulatory and compliance burdens as well as competition with nonbanks, including Farm Credit System institutions. Lenders also noted that succession planning was a challenge, with most anticipating that at least a third of their lending staff will turn over in the next five years.
“Like producers, agricultural lenders are aging, and they have valuable experience that will be hard to replace,” said Brittany Kleinpaste, director of economic policy and research at ABA. “Agricultural lending requires specific knowledge, making it difficult to identify and recruit potential new lenders. Opportunities to educate and inspire the rising workforce are vital to ensuring new lenders have the knowledge to understand the unique characteristics of the ag sector.”