Ag lending; not business as usual

Washington Ag Today August 7, 2009 Bankers want to extend credit to agriculture, however it is not business as usual. That was the message Dr. Keith Leggett, Senior Economist for the American Bankers Association delivered to a meeting of the Far West Agribusiness Association in Spokane this week. In an interview, Leggett said bankers are seeing more risk points in agriculture.

Leggett: “You know farm income is going to be down this year according to the USDA. Farm land values run up and now there is concern about are we starting to see a drop in that? The first time in over 20 years that we saw a decline in farmland values. The last time was in 1987. You know farmers need to realize that their lenders are going to be more cautious. They are going to require probably more collateral. The loan to value ratio may be lower. There may be greater emphasis on stress testing to see how the loan will perform under different price scenarios, both with regard to commodity prices but also with regard to input prices.”

Leggett mentioned the first drop in farm land values in 21 years. USDA says non-irrigated cropland in Washington declined five percent and irrigated cropland dropped 2.4% from 2008 to 2009. Pasture land was down 3.9 percent in Washington.

I’m Bob Hoff and that’s Washington Ag Today on the Northwest Ag Information Network.