Academic journal article ABA Banking Journal

ABA Agricultural Banking Update: Survey: Ag Lenders Raise Concerns over Commodities, Succession Planning

Academic journal article ABA Banking Journal

ABA Agricultural Banking Update: Survey: Ag Lenders Raise Concerns over Commodities, Succession Planning

Article excerpt

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.

Land values were also a point of concern--47 percent reported lower land values in 2016, and looking ahead, 56 percent said they expected declines to continue. On average, lenders said that 44 percent of average quality land and 33 percent of cash rents are above fair market value in their area.

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; one in four said they have between one and three lenders on staff with an average of 20 years of experience, though most anticipate that at least a third of their lending staff will turn over in the next five years. …

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