Ag lenders becoming concerned with borrowers’ credit conditions

Agricultural lenders in the western Corn Belt are becoming increasingly concerned about the creditworthiness of ag borrowers as the farm economy weakens. That’s one of theconclusions drawn from the latest survey of ag lenders conducted by the Federal Reserve Bank of Kansas City.

Brian Briggeman, an economist with the Fed’s Omaha branch, says commercial banks have tightened credit standards. “They’re making sure that if they do needthe credit, or extend the credit, that’s it done appropriately,” Briggeman says, “that there are earnings there to pay it back.”

Briggeman says the struggling livestock and dairy sectors are of particular concern to bankers. He says farmers, in general, havebecome more frugal with their spending because of the current volatile ag economy.

“There are some signs that say we’re getting ready for another potential storm if it does happen,” he says, “but we’re also positioning ourselves to take advantage—or toseize—those opportunities when they become available.”

On a positive note, the survey indicates that farmland values appear to have stabilized after some modest declines at the end of 2008. “The high quality farmland is still bringing a strong price—but a lot ofthat land that’s maybe marginal, there’s just limited buyer interest that’s our there,” Briggeman says.

The Fed’s Kansas City district includes Nebraska, western Missouri, Kansas, Oklahoma, Wyoming, Colorado and northern New Mexico.

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