Demand for Farm Loans Down as Profitability Increases

CINCINNATI, Ohio — According to the 2021 Agricultural Lenders Survey results recently released by the American Bankers Association (ABA) and Farmer Mac, farm profitability is improving.

Nearly 70 percent of ag lenders report that government support programs helped drive farmer profitability, and for the first time in the survey’s history, a majority of borrowers (80 percent) will be recording a profit.

So wince profitability doesn’t appear to be a primary concern; what is? Competition. More than half the lenders surveyed rated increased ag competition as their top challenge soon. In contrast, weak loan demand, interest rate volatility, and the deterioration of ag loans followed closely behind.

For the first time in 5 years, the pullback in demand for production loans should be temporary if the ag bankers are correct. However, with government payments expected to drop dramatically over the coming months, significant increases in crop inputs, and supply chain constraints, the lenders suggest that loan demand will increase in 2022.

Despite the slowdown in ag lending over the past year, many of the same bankers played a crucial role in assisting customers through the Paycheck Protection Program (PPP) by securing more than $16.4 billion through well over 600,00 PPP loans.
(SOURCE: All Ag News)

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