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Ag Bankers: Farm Profitability Slowly Improving
USAgNet - 11/01/2017

Eighty-two percent of agricultural lenders reported a decline in farm profitability in the last 12 months, according to a joint survey by the American Bankers Association and the Federal Agricultural Mortgage Corporation. Despite the continued decline, the survey of more than 580 agricultural lenders revealed that the agricultural loan approval rate is 84 percent.

"We were encouraged to see that lenders remain ready to assist farmers and fulfill their credit needs despite the drag in the agricultural economy," said Brittany Kleinpaste, director of economic policy and research at ABA. "Overall, the data showed that agricultural lenders are a little more optimistic about what's ahead for their customers than they were in December of 2016."

While a high percentage of ag lenders continue to report a decline in farm profitability, 7 percent fewer reported a decline compared to the December 2016 ABA/Farmer Mac survey. However, the drivers of industry stress remain the same. Ninety-three percent of lenders indicated commodity prices are a top concern. Grain and dairy remained the sectors that lenders are most concerned about, while lenders reported less concern for the cattle and hog sectors than in the previous survey. Other top concerns are liquidity (87 percent), farm income (85 percent), farm leverage (77 percent) and weather (56 percent).

On average, survey respondents exhibited more confidence in stable land values than in the December 2016 survey. Fifty-seven percent of respondents reported stable values in the first half of 2017, and 51 percent expected no major changes in the second half of 2017. Lenders reported that a high percentage of average quality land (41 percent) and cash rents (32 percent) are above fair market value in their area.


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