Financial stress rising in farm sector
The margin for error is shrinking in the farm sector as financial stress, measured by rising debt loads and the erosion of working capital, is rising, said Todd Van Hoose, chief executive of the Farm Credit Council on Wednesday. A reported 8% of loans in the Farm Credit System are in poor condition, rated as not viable, doubtful, or a loss — double the rate in 2014 at the end of the commodity boom, Van Hoose said during a digital briefing.
“We’re not seeing an enormous number of farmers tip over, but we are seeing farmers’ financial conditions deteriorate,” said Van Hoose. Less than 1% of loans were listed as nonperforming.
In the past four years, direct government payments to farmers have totaled $91 billion, said Van Hoose. “So as you look forward, what is [farm income] going to look like? That again is a significant concern as you think about farmer financial health moving into 2021.”
Direct federal payments include traditional farm subsidies, land stewardship payments, and, importantly in 2019 and 2020, the stopgap trade war and coronavirus aid programs created by the Trump administration.
The cooperative Farm Credit System has 571,000 borrowers and a $297 billion portfolio, $138 billion of it in farm real estate.
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