Lenders taking ‘wait and see’ attitude on farm credit

    Early indications are that farm credit could tighten this year, but area agricultural lenders say it’s just as likely that while they won’t improve much, they won’t get much worse, either.
    A recent bulletin from University of Nebraska Extension says forecasters from the 10th Federal Reserve District, which includes Nebraska, say “credit conditions have eroded and will likely continue to decline.”
    Not surprisingly,  economic dislocation from the COVID-19 pandemic bears much of the blame. At the same time, those problems are aggravated by weak markets, which led to dropping farm income and liquidity in the second quarter of the year, and persistent drought in this part of the state.
    And, Nebraska has the lowest farm income expectations in the district, which also covers Kansas, Missouri, Oklahoma, Colorado, northern New Mexico and Wyoming.
    But bankers in this area aren’t ringing alarm bells yet, but are taking more of a wait-and-see attitude.
    “We really don’t know yet,” said John Paisley, president of agricultural banking for Adams Bank and Trust in Imperial.
    “The crops are still out in the field and commodity prices have improved. But it doesn’t appear it’s going to be any worse than last year,” he said.
    Even with those low commodity prices, government aid will help until commodity prices rebound. Much of that aid has come in the form of federal stimulus checks from measures like the Paycheck Protection Program and Economic Impact disaster loans.
    Credit probably will remain tight at the same level it has for the last seven or eight years, Paisley said.
    He said he doubts credit conditions will contribute to more farm consolidation.
    “I think they’re going to survive through this. If they’re diversified with cattle, that sometimes helps, too, diversification of different crops,” he added.
    Another area banker said any problems due to tighter credit could be cushioned by the same standard measures farmers have always been advised to take.
    “I think it’s going to rely upon how guys position themselves marketing-wise, as well as did they cut costs this year knowing commodities were going to be as low as they are,” said Chris Lee, branch manager at Waypoint Bank in Imperial.

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