Financial stress in the farm sector is continuing to make a slow and steady climb. The stress continued to rise in the third quarter as income in the farm sector stayed low. The Federal Reserve Bank of Kansas City’s Ag Credit Survey says producers are expending more working capital to meet financial obligations because of continued weakness in both the crop and livestock sectors of the ag economy. Over 90 percent of bankers who responded to the survey said they’ve seen at least some deterioration in working capital their clients have available. 30 percent of bankers responded by reporting a significant level of deterioration in working capital for their clients. Working capital is important buffer against financial challenges, and less capital means more borrowers run the risk of becoming highly leveraged while trying to sustain their operations. Weakness in the farm economy also led to a decline in farmland values. The value of each type of farmland, including irrigated, non-irrigated, and ranch-land, fell more than 6 percent from last year. Bankers also report increasing collateral requirements for agricultural loans, as well as declining available funds and farm loan repayment rates.
From the National Association of Farm Broadcasting news service.