The Delta Farm Press reported today about the new release of the ABA Center for Agricultural & Rural Banking’s Farm Bank Performance Report, detailing recent trends in the rural banking system.
In 2008, the report said, the U.S. banking industry held $123.5 billion in farm loans, an 8 percent increase over the $114.2 billion in 2007. The 2008 figure for farm banks represents more than 50 percent of the total farm credit outstanding in the United States, according to the American Bankers Association’s Center. The total also included $69.1 billion in small farm loans, of which $26 billion was invested in “very small farm loans.” ABA Center officials said they consider a small farm loan as being one for $500,000 or less. A micro-small farm loan is $100,000 or less. The number of small farm loans in 2008 surpassed 1.2 million with the great majority — almost 1 million — under $100,000.
The Wall Street Journal’s discussion of the report pointed out that, while lending might have increased, farm bank earnings fell “10.3% in 2008 as the global recession seeped into the rural economy.” The discussion of farm income at FarmPolicy.com also cites an article in the Minneapolis Star-Tribune discussing a University of Minnesota survey finding that median profits for farms included in the survey fell 15% in 2008, but that certain agricultural sectors, such as dairy, which fell 38%, felt the dropoff much more severely. The Wall Street Journal also explained that “The problems for farm bankers are beginning to multiply this year, however. The incomes of farmers, which soared to record highs in 2007 and 2008, are projected by the U.S. Agriculture Department to sink 20% this year. Some players in the overbuilt corn-to-ethanol fuel industry are falling behind on loan payments.” The Wisconsin Ag Connection had similar news, saying that, according the latest survey of agricultural lenders in the Seventh Federal Reserve District (which includes portions of Wisconsin, Iowa, Illinois, Michigan and Indiana), “there was a quarterly decrease of six percent in the value of good agricultural land for the first three months of this year, which was the largest quarterly decline since 1985. The year-over-year increase in district farmland values also eroded to just two percent in the first quarter of 2009, [and] the growth in farmland cash rental rates moderated in the district so far in 2009, with an increase of seven percent.”
In other farm finance news, an amendment to the 'Helping Families Save Their Homes Act,” signed into law last week, will help agricultural borrowers as well. It will require government agencies to make sure that banks use their TARP funds to help farmers in need of financial assistance. According to a pork industry newsletter, “[i]n March, [Senator] Feingold and New York Senator Kristen Gillibrand led a group of colleagues asking USDA and the Treasury Department to require TARP recipients to implement a foreclosure-mitigation program that includes farm loan restructuring, similar to the one in place for homes. Many farm loans include a home as part of the loan or as security against the loan, so extending this provision to farmers and ranchers would help save farms and homes from foreclosure, Fiengold contends.” Another article on the topic is located at the Wisconsin Ag Connection site.
