Dairy Lenders Indicate Ag Loans Tightening
Low milk prices and cash flow issues were the top two concerns of agriculture lenders attending the Siouxland Agricultural Lenders Seminar in November. A survey of the 58 attendees that provide services to more than 500 dairies found that agriculture lenders are seeing more at-risk accounts in 2018 compared to 2017.
Following in line with that, the group indicated 45 percent were rejecting or reducing more operating loan requests, and 71 percent were seeing more alternative and vendor financing by farms.
With weakened farm income, 39 percent of the lenders said they were raising collateral requirements, 34 percent were increasing interest rates, and 12 percent were reducing the dollar amount of loans or rejecting more loan requests.
Only 2 percent of the loan officers said they had not changed lending practices from 2017 to 2018.
Shift in farm growth Perhaps the most notable shift described by Fred Hall, Iowa State University extension outreach and dairy field specialist in a recent E-Dairy News and Views article was in lenders’ perspectives on farm growth.
In 2017, 74 percent of bankers at the same event said they expected their clients to expand their herds, while 14 percent predicted at least one of their clients would exit the industry.
In 2018, only 39 percent of lenders indicated one or more of their clients planned to expand. Meanwhile, 10 percent expected to see a client exit the industry.
Financial waters are currently rough in agriculture, and agriculture lending is taking increasing note. Consider 2019 a tough year to acquire financing to help stem the tide of poor milk prices and meager cash flow.