Farm Loans

Not to gloom and doom, but to be realistic, with farm income expected to drop again in 2016, a publication by FarmerMac projects the impact that may have on farm lending.

As we have been reporting, USDA projects farm income to fall for the third straight year following record income levels. A publication by FarmerMac suggests that could put pressure on farm lending in 2017. We eavesdropped on a conversation between Curt Covington, Senior Vice President of Ag Finance for FarmerMac, and Farmer Mac Economist Jackson Takach. "I think in the end most bankers today are looking at this and saying there are storm clouds in the future and while we have just gotten through, probably one of the tougher renewal seasons for these rural bankers over the last 10 to 15 years, most of them now are setting themselves up and preparing for a tougher fall when the crops come in and they have their conversations with their borrowers. Curt, I have to agree with you there. I think two years of down farming income, you can cover that a lot with existing assets, you have good working capital from great years in 2012 and 2013 and even some of 2014 was pretty good for certain producers. When you get to that third year of down incomes and people really have started whittling away at that working capital, so if farm incomes turn out to be lower in 2016, it could spell a tough renewal season come 2017.

Covington says the overall consensus on the farm economy this year is not business, as usual.