Posted February 28, 2014
Amid the expectation of low crop prices, some banks are worried that farm cash flows will be down this year, according to an article by the Omaha World Herald available here.
“Some banks are worried about corn and bean prices and the ability of customers to operate at a profit,” said Troy Thornton, an assistant deputy comptroller in the Omaha office of the Comptroller of the Currency (OCC), which monitors 73 banks in Nebraska, Iowa, and South Dakota for safety and soundness.
Corn and soybean prices are predicted to drop and some land prices are also falling.
As a result banks in the Midwest have started tightening agricultural loan criteria, according to an article by AgriMoney available here.
According to the Federal Reserve, more than one in four banks in Illinois, Iowa, and Indiana have “tightened credit standards for farm loans in the October-to-December period, compared with a year before.”
In addition, a “loan repayment index kept by the Chicago Fed fell to its lowest since 2010, and a loan demand index” rose to a six-year high. The bank said, “Agricultural credit conditions deteriorated.”
Farmers’ capital spending on items such as “land, buildings and machinery was seen falling by more than half the lenders surveyed by the Fed,” compared with less than 10% predicting more investment.
For more information on agricultural finance and credit, please visit the National Agricultural Law Center’s website here.
Share: