Meat & Livestock News

Agricultural Lenders Shift Focus to Liquidity and Income Concerns for Farmers

Dollar bills are in the hands of a farmer on a background plantation. Profit, income from agribusiness concept. Agricultural startups. Support and subsidies. Farm loans. Selective focus

In the latest 2023 Agricultural Lender Survey report, a collaboration between the American Bankers Association and the Federal Agricultural Mortgage Corporation (Farmer Mac), it has been revealed that agricultural lenders are increasingly concerned about liquidity and farm income levels among farmers.

The report, which was unveiled at the American Bankers Association Agricultural Bankers Conference in Oklahoma City, indicates a shift in concern from inflation — the predominant worry in the previous two years — to the financial stability and earnings of the agricultural sector.

This change in focus reflects the lenders’ response to the margin compression experienced by producers in 2023, despite the record farm incomes reported in the past.

Jackson Takach, Farmer Mac’s chief economist, noted that with the transition in the economic cycle, the emphasis on fundamental financial health has grown, leading to liquidity and farm income levels becoming the primary concerns for the upcoming year.

Tyler Mondres, senior director of research at ABA, added that although there has been a squeeze on margins, the overall credit quality within the agricultural sector has remained robust this year.

However, lenders anticipate a reversion to the mean in terms of credit quality, which has led to a moderate increase in concerns regarding the potential deterioration of agricultural loans.

In response, lenders are reviewing underwriting standards and loan terms as part of their risk management strategies, while remaining committed to supporting American farmers and ranchers.

This shift in priorities among agricultural lenders underscores the evolving challenges faced by the farming community and the need for continued financial vigilance in the sector.