INSIGHTS FROM AGRICULTURAL LENDERS · Top Farmer Conference Beck Agricultural Center Dr. Brady...

INSIGHTS FROM AGRICULTURAL LENDERS

January 11th, 2019Top Farmer ConferenceBeck Agricultural Center

Dr. Brady Brewerbebrewer@purdue.edu

AGRICULTURAL LENDER SURVEY• Survey expectations and past results from

national sample of agricultural lenders• Interest rates• Spread over cost of funds• Farm loan volume• Non-performing loans• Land values

• Lenders respond whether a particular measure will “go up”, “stay the same”, or “go down”

“THIS YEAR HAS BEEN A MIXED BAG.”

-FALL 2018 LENDER SURVEY

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Loan Interest RatesPast 3 Months

Farm Real Estate Intermediate Operating

Agricultural Lender Survey, Fall 2018

Agricultural Lender Survey, Fall 2018

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Loan Interest RatesShort Term Expectations (1 Year)

Farm Real Estate Intermediate Operating

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Operating

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Operating Loan Volume

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Agricultural Lender Survey, Fall 2018

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Farm Real Estate Loan Volume

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Agricultural Lender Survey, Fall 2018

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Past 3 Months Short Term (1 Year) Long Term (2-5 Years)

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Total Farm Loan Volume

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Agricultural Lender Survey, Fall 2018

“LENDERS IN GENERAL ARE GETTING AGGRESSIVE AGAIN, TAKING ON RISKIER LOANS THEN WHAT HAS BEEN SEEN IN THE PAST YEAR OR TWO. MARGINAL PRODUCERS WHO HAVE BEEN HEAVILY MONITORED OR "SQUEEZED" ARE HAVING OTHER LENDING OPPORTUNITIES OPEN UP TO THEM.”

-FALL 2018 LENDER SURVEY

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Spread Over Cost of FundsPast 3 Months

Farm Real Estate Intermediate Operating

Agricultural Lender Survey, Fall 2018

“CURRENTLY WE HAVE NO NON-PERFORMING FARM LOANS. EXCELLENT YIELDS IN 2018 AND MODERATE LEVELS OF FORWARD CONTRACTED CROP LEAD ME TO BELIEVE THAT MOST IF NOT ALL WILL PERFORM AFTER THIS SEASON. FUTURE RESULTS ARE LESS CLEAR AND CERTAINLY COULD CREATE ADDED STRESS WITH FARM LOANS.”

-FALL 2018 LENDER SURVEY

“OUR FARMERS HAD AN EXCELLENT HARVEST, EVEN THOUGH THE COMMODITY PRICES ARE DOWN, THE FARMERS ARE OPTIMISTIC AS THEY HAVE A LOT OF STORED UP INVENTORY TO SELL.”

-FALL 2018 LENDER SURVEY

“GENERALLY, WE ARE IN A RISING RATE ENVIRONMENT. HOWEVER, CROP AND CATTLE PRICES REMAIN THE SAME. SAME CAN BE SAID ABOUT OUR POULTRY PRODUCERS. DEPENDING ON HOW MUCH RATES ACTUALLY INCREASE OVER THE NEXT FEW YEARS WILL DETERMINE THE REAL STRESS ON PRODUCERS AND LENDERS AS WELL.”

-FALL 2018 LENDER SURVEY

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Past 3 Months Short Term (1 Year) Long Term (2-5 Years)

Total Farm Loans

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Non-Performing Total Farm Loans

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Agricultural Lender Survey, Fall 2018

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Non-Performing LoansPast 3 Months

Total Farm Loans Farm Real Estate Intermediate Operating

Agricultural Lender Survey, Fall 2018

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Non-Performing LoansShort Term Expectations (1 Year)

Total Farm Loans Farm Real Estate Intermediate Operating

Agricultural Lender Survey, Fall 2018

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Non-Performing Loans, Crop SectorShort-Term Expectations (1 Year)

Corn & Soybeans Wheat Cotton Fruits/Vegetables Nurseries

Agricultural Lender Survey, Fall 2018

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Non-Performing Loans, Livestock SectorShort-Term (1 Year)

Dairy Hog Poultry

Agricultural Lender Survey, Fall 2018

DELINQUENCY RATES AT COMMERCIAL AGRICULTURAL BANKS

“I FULLY EXPECT TO SEE A RISE IN THE FARMLAND AUCTION PRICES COME THE FIRST PART OF DECEMBER WHEN THEY TYPICALLY OCCUR. LAST WEEK WE HAD A GOOD INDICATOR DUE TO A PRIVATE SALE AT A GOOD $1000 PER ACRE INCREASE OVER THE LAST YEARS PRICES.”

-FALL 2018 LENDER SURVEY

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Past 3 MonthsLand Value

Agricultural Lender Survey, Fall 2018

Lower38%

Same 37%

Higher25%

Long Term (2 to 5 years)Land Value

Agricultural Lender Survey, Fall 2018

SO WHAT DOES THIS ALL MEAN FOR THE FARMER?• As the banker put it….today’s agricultural economy is a

mixed bag.• Some farmers are still profitable and expanding

• Interest rates to continue increasing

• Worry about increasing non-performing loans persists• Despite little increase in past defaults.

• Lenders report stable land values• Long-run expectations are divided

Questions?Dr. Brady Brewer765-494-4324bebrewer@purdue.edu