An ag economist says he doesn’t expect the financial pressures facing farmers to spiral out of control.
Nathan Kauffman with Federal Reserve Bank of Kansas City says while some producers are facing stress, broader credit conditions are relatively stable. “Even though you’re seeing a pretty significant increase in operating loans and negative profit margins, it’s not leading to what we would call a crisis where you’re seeing a significant deterioration in credit quality.”
Speaking on a recent University of Nebraska-Lincoln webinar, he said access to farmland has been key. “To the extent that land values remain strong, those producers that have equity built up in land, that ensures some amount of smooth continuity as it relates to financing at a time when financing has been elevated.”
He says the downfall is that lending institutions are using land as collateral, which could be problematic if producers default on their loans.
But, Kauffman says, one group could be more vulnerable. “Generally, it’s a younger producer that hasn’t been around long enough to take advantage of the really strong increases in land values. Maybe they’re renting a very large share of their ground or leveraged a bit more on things like machinery.”
He says the run-up in commodity prices from 2020 to 2023, and federal relief payments have allowed farmers to have more cash on hand helping improve liquidity.
