Things haven’t fallen to the level of the ag crisis of the 1980s. Not yet, anyway.
There are signs of trouble in farm country, but lenders and others who work in farm financials are not seeing signs of an upheaval of the likes that marked the worst ag economic crisis of the modern era.
“Nationwide, there were fewer bankruptcies last year than in 2010 or 2011, which is kind of strange,” said Shawn Smeins, general manager of St. Louis- based Rabo AgriFinance.
Many bankers and others who work in farm lending expected to see more problems following years of stagnant grain prices in the Midwest. But strong economic fundamentals have apparently provided many farmers with a solid economic base that may help them survive at least a short-term recession.
“We’re not seeing an uptick in bankruptcies. It’s not what you would expect it to be,” said Jackie Martinie, senior vice president and chief credit officer with Farm Credit Illinois. “Our chief appraiser is not seeing an increase in foreclosures or forced sales.”
Farm bankruptcies nationwide numbered fewer than 500 last year, down from about 700 in 2010, Smeins said. In the Corn Belt there has been an increase; some sources say they have gone up 45 percent. Still, the stats aren’t panic-worthy.
“The numbers weren’t big to start with, so it’s still not a huge number overall,” he said.
Going-out-of-business sales are not at numbers that concern those monitoring farm financial health. Jamie Keller, managing broker with a Sparta, Ill.-based farmland sales company, is among those pleasantly surprised that more farmers aren’t throwing in the towel.
“It’s not what we expected, with (grain) prices so low,” she said. “We thought some guys would be getting into trouble.”
Lessons were learned after the agricultural depression of the mid-1980s, when a number of factors led to record foreclosures. The current downturn seems to have a softer bottom.
“I’m not totally surprised, because of the liquidity position,” Martinie said. “They still have quite a cushion, if you look at their balance sheets. They have put themselves in a position where they have a lot of options before they have to go through foreclosure.”
Some auctions may not be billed as going-out-of-business sales.
“Some guys are tired of fighting the battle,” Smeins said. “Some older gentlemen have said they saw the highs from 2008 to 2013 and now they’re seeing the lows, so maybe it’s time they hang it up.
“It’s the emotional piece. How much can you take when you haven’t been making money for five or six years?”
Rather than seeing more liquidations, lenders are finding more subtle responses from farmers struggling with an increasingly fragile ag economy.
“From a servicing perspective, we have seen an uptick,” Martinie said. “The majority of that is in changing payment dates to align better with cash flows, or partially leasing land for equity in a rebalance loan. We’ve seen an increase in short-term extensions, where we give someone two or three months to find out what their plan is moving forward.”
Smeins sees similar moves.
“We’ve done a lot of restructuring,” he said. “We’re getting to the point that there is only so much restructuring we can do. ... I think we’re going to see some pressure — probably more than last year.”
He is especially concerned with a rising debt-to-asset ratio on farms. Some reports say it is the weakest that it has been in three decades.
“We are seeing the stress. That’s the bottom line,” Smeins said. “... We saw it last year and this year, even though the yields were there. The pricing opportunity is out there, but it’s tough to make it right now.”