Ag Economy Trends

Risk Management in agriculture has changed significantly since the mid-80s, a period marked by the farm crisis, extremely high interest rates, declining real estate values, and minimal margins in grain farming. Farm Credit, Illinois CEO, Aaron Johnson has been in the ag lending industry for 20- some years, and talks about the trends and cycles that he has seen in agriculture over those years.

“We had very high interest rates. Prime got up to 21 and a half percent. Real estate values had dropped some places, 50 or 60% from where they topped out, and there just wasn't any margin in grain farming or really livestock, either one. So it was a really tough time on the farm. The difference back then, there was a variable interest rate. You couldn't fix an interest rate. Back then, everything floated. So as rates went up, your rate went up, regardless where today you can lock in adjustable or fixed interest rates.

Johnson says that crop insurance in the 80s was yield only, with just 10% of farmers purchasing it today, over 90% have revenue protection. Despite this improvement, agriculture has continued to experience cycles of ups and downs since the 80s.”

We're seeing a little bit of slippage in our credit quality, and the margins are just tight."

Coupled with strong land prices and working capital lapses Johnson says it will make for an interesting farm economy ahead in.