Page 42 - February 2018 Disruption Report Flip Book

FARM CREDIT SYSTEM / FARMER MAC JAN.U-FAERBY. 2018
U.S. farm profits fall to lowest level since 2006
In 2018, American farmers’ net farm income is projected to fall l 6.7% to $59.5 billion—down 52% from record earnings of $123.8 billion in 2013, according to the U.S. Department of Agriculture.
“This may now be what we consider a normal time,” said Carl Zulauf, former agricultural economist at Ohio State University. “The period from about 2007 to 2013, that was the exceptional period. Farmers have had to confront the adjustment.”
Farmers increased borrowing 51% in the fourth quarter of 2017 from the year ago period—the most in two years, according to the Kansas City Federal Reserve. Farm borrowing costs rose 4.5% on average, up from 3.7% a year earlier, to a 27-year high.
Most farmers and lenders refrained from over-leveraging to expand operations from 2011 to 2013, when incomes and crop prices were about twice as high as they are now, according to Tim Koch, the chief credit officer for Farm Credit Services of America. “A low debt-to-asset ratio compared to the 1980s means producers have time to work through the process of lower costs to match current low commodity prices,” Koch said. “We don’t have a debt issue, we have a cash flow issue that farmers can still work through.” (Bloomberg News, Jeff Wilson and Alan Bjerga, 02/07/18)
Stress and duress on farms today
With profitability falling in the ag sector, FCA appears to be encouraging deferral of loan payments, according to FCW’s Bert Ely, who wrote:
Much to my surprise, Dallas Tonsager, the chairman and CEO of the Farm Credit Administration (FCA), in a Jan. 30 speech to the Farm Credit Council (the FCS trade association), effectively endorsed what FCSA has offered to its borrowers and encouraged other associations to do the same thing. Specifically, Tonsager stated that at a meeting last year, “I learned that some associations are giving some of their borrowers the option to defer the principal portion of their 2018 payments. This gives these producers the chance to re-amortize the outstanding balance over the remaining life of the loan. It also gives them additional working capital, which in turn gives them the flexibility and time to make needed adjustments to their operations.”
© 2018 by Canfield Press, LLC. All rights reserved. www.canfieldpress.com 42