COLUMBUS, Ohio — Farm lenders are reporting profits.
That's according to the Fall 2021 Agricultural Lender Survey by American Bankers Association.
Spectrum News 1 anchor Chuck Ringwalt talked with agriculture expert Andy Vance about the findings.
Ringwalt: “One key takeaway from the survey is that a majority of (agricultural) lenders reported overall farm profitability increase from the previous year. Andy, that’s good for lenders, but can you explain what that means for farmers?”
Vance: “Sure. And to highlight the reason, that's good for lenders, it’s because the farmers can afford to pay off their loans, which is obviously a key concern for lenders. For the farmers, it means we’re able to make money doing this thing that is part of our livelihoods or is part of our family history or whatever reason they're involved in farming. It's the first time since 2016 that the lender survey found a majority of lenders expected a majority of their clients, their customers to be profitable. Think about that. We're talking about five years where a majority of borrowers were not expected to be profitable, according to their bankers. That's a long period of time to not be profitable, so certainly being able to get into the black is a big deal for any business, especially one as essential as agriculture and farming.”
Ringwalt: “Got it. While there was an increase in profits, the survey reports government assistance as a contributing factor. If that assistance dries up and farmers face an economic downturn or inflation, does the report predict whether they'll be able to make their payments or will they default on their loans?”
Vance: “Yeah, I would say inflation concerns, according to the report, and certainly from folks I talked to are really high and getting higher now. Sometimes it's hard to separate the signal from the noise, like how concerned are people because they're actually seeing inflated prices for various things versus, ‘Hey, I've been hearing about this a lot in the news or on social media.’ But generally speaking, if you look at crop inputs, in particular fertilizer prices, energy costs; the increased cost of energy, namely fuel, is a real concern. Farmers who are in the field now finishing up harvest are definitely seeing that every time they go to fill up their diesel tanks. They know it's more expensive than it was the last time they filled those tanks up, so those are very real concerns and could absolutely hinder profitability over the next two, three, or four years, depending on what happens with overall inflation.”
Ringwalt: “Got it. When we look at farmers right here in Ohio, when you speak with them, what's their situation generally look like? Are they barely making ends meet or are they able to see for the future?”
Vance: “One of the things to understand is that it varies widely depending on what percentage of the household income comes from farming. In other words, the number of people who are farming for a living, or maybe in a two-income household, both spouses are deriving their income from the farm. That's a relatively small number. Most farms have some sort of additional farm income these days. Either a spouse that works in town, so to speak, as we say or the principal operator. Maybe the farm is more of a hobby, although it could be a very large hobby to several hundred thousand dollars a year hobby. They have some income off the farm, so it really depends on what their overall situation was going into the pandemic. Were they able to maintain their job? A lot of farmers maybe have jobs in manufacturing sectors. Were they dealing with any pandemic-related loss of income there? So it varies really widely depending on what their overall financial situation is.”