Despite Lower Incomes, Farmers 'Well Positioned' -- Ag Bank
Net income was down almost 8% for the first quarter of this year compared to the same period in 2014, but farmers generally remain on relatively solid financial footing in the eastern Corn Belt and mid-South, a report out this week shows.
Officials with Louisville, Kentucky-based Farm Credit Mid-America said this week while farmers in the bank's coverage area comprising Indiana, Ohio, Kentucky and Tennessee have seen net income dip by 7.6% -- totaling $71.7 million for the first quarter of 2015 -- assets actually grew at a pace just slightly behind the year-over-year growth in total loan volume. It's a sign, officials say, that though borrowed money accounts for a slightly larger piece of the overall operating capital pie, the bottom hasn't fallen out of the marketplace for the region's farmers; in fact, it's typical positioning for this point in the ag market cycle.
"Low customer debt-to-asset ratios reaffirmed the agriculture industry’s strong financial position, despite economic uncertainty, and continued growth in the company’s rural real estate mortgage portfolio signaled increasing producer confidence," according to a Farm Credit Mid-America report released Wednesday. "Additionally, because agricultural lending tends to follow annual agricultural production cycles, officials anticipate loan levels to increase throughout the planting and growing seasons to meet farm operating and capital needs."
Much of the relatively rosy financial picture for that part of the country -- which has seen "adversely classified loan" volume shrink slightly since the end of 2014 -- stems from livestock industry gains helping offset losses in the crop sector. Altogether, the bank saw farm assets grow by 5% to $20.5 billion among its farmer customers in the first quarter of this year, while loan volume was up 6.5% at $18.5 billion from the same time a year ago. And, though negative returns are expected for a lot of grain farmers in the coming year, Farm Credit Mid-America CEO Bill Johnson says the numbers indicate farmers are weathering the farm downturn and are in a decent position for when prices do inevitably swing back around to profitable levels.
“Coming off a strong 2014, our customers are equipped for success in the long-term, and have done a good job getting ahead of what may be challenging times,” Johnson says. “Looking forward, our customers and cooperative as a whole are well positioned to navigate the cyclical nature of our industry.”