Amid ongoing stresses in the ag sector and economic dislocation from the COVID-19 pandemic, lenders reported that just under 51% of their agricultural borrowers were profitable in 2020, a decline of six percentage points from the prior year, according to the latest agricultural lenders survey conducted by the American Bankers Association and Farmer Mac. About half of the lenders, 49%, said do not expect borrower profitability to improve in 2021 and respondents expressed the most concern about the grain, dairy and cattle sectors.
Credit quality and the deterioration of agricultural loans were ranked as the top concerns facing lenders in 2020 for institutions of all sizes and across all regions. Competition from other lenders and weak loan demand were also ranked as leading concerns. Nearly 60% of lenders said they expect delinquencies to increase for agricultural production loans over the next year. Nearly three in five lenders reported that demand for agricultural production loans was flat over the last six months.
Despite the negative outlook on average, lenders approved approximately 72% of agricultural loan applications received over the last 12 months. Over the next 12 months, lenders said they expect to approve 88% of renewal requests.
