Is the recession bleeding into agriculture?
Some have noted a rise farm loan delinquencies in the last twelve months, according to a commercial lending research company. Does this comprise a trend?
Agriculture is a substantial market in commercial credit, says the Skokie, Illinois-based company. Bill Phelan, president of PayNet, Inc., which tracks commercial lending activity in 23 different markets ranging from construction and transportation to medical practices, accounting firms, lawyers and dentists, says lending trends show that the agricultural industry has the largest increase in borrowers falling behind on loan payments by 90 days or more, for the last 12-month period.
The news comes after PayNet recently completed research on delinquency rates on farm loans five years in term for $100,000 or more. And, while the numbers don't yet indicate the sky is falling on U.S. farmers, it does show there may be more who are having truoble making ends meet, just like many Americans today. Though PayNet doesn't breakdown the types of farmers that are falling behind on loan payments, the message of the research indicates the weak economy is catching up with the entire agricultural industry.
"The farmers are still in pretty good shape. It just looks like they are becoming caught up in the business credit cycle, like everyone else. Our stats throw all farmers into one bucket," he says.
Phelan adds, "We only have anecdotal evidence on sub-segments of the agriculture industry. For instance, we know the diary farmers are showing a lot of strain right now with the price of milk falling, yet the costs of production remain high."
"This doesn't mean farmers have the most delinquencies of all the sectors we research. Weâ€™re only saying that agriculture had the largest increase in delinquencies since last year," Phelan says.
"So, farmers have gone from a 'severe delinquency' rating of .66% to a 1.2%, over the last 12 months. That's where you get the 82% increase in delinquencies."
Some Agriculture Online Farm Business Talk members say this increase isn't enough to call it a trend. â€œThe 82% jump in late payments is following one of the best years know to grain farmers in history with credit markets in '08 still very loose. I'm guessing the number of late payments last year was very low compared with historical numbers," says Farm Business Talk member iowastateisgreat.
Still others say they haven't seen this happen at all in their areas. Fellow Farm Business Talk member kraft-t says the report doesn't reflect his neighborhood at all, though many of his area's farmers have learned from past events and took steps to protect themselves. "Everything's fine here, but I wasn't spending dollars when prices were high. Those of us that went through the '80s ought to know better."
And, fellow member wcmo1 says he's hesitant to take the delinquency rate too serious. "Not enough information -- an 82% increase on a very low delinquency rate is still a very low delinquency rate," he says.