INSIGHTS FROM AGRICULTURAL LENDERS January 11 th, 2019 Top Farmer Conference Beck Agricultural Center Dr. Brady Brewer bebrewer@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 LENDER SURVEY
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Loan Interest Rates Past 3 Months Farm Real Estate Intermediate Operating Agricultural Lender Survey,
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Loan Interest Rates Short Term Expectations (1 Year) Farm Real Estate Intermediate Operating Agricultural Lender Survey,
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Operating Loan Volume Past 3 Months Short Term (1 Year) Long Term (2-5 Years) Operating Agricultural Lender Survey,
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Farm Real Estate Loan Volume Past 3 Months Short Term (1 Year) Long Term (2-5 Years) Farm Real Estate Agricultural Lender Survey,
Diffusion Index 180 160 140 120 100 80 60 40 20 0 Total Farm Loan Volume Past 3 Months Short Term (1 Year) Long Term (2-5 Years) Total Farm Loans Agricultural Lender Survey,
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 LENDER SURVEY
140 Spread Over Cost of Funds Past 3 Months Diffusion Index 120 100 80 60 40 20 0 Farm Real Estate Intermediate Operating Agricultural Lender Survey,
CURRENTLY WE HAVE NO NON-PERFORMING FARM LOANS. EXCELLENT YIELDS IN 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 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 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 LENDER SURVEY
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Non-Performing Total Farm Loans Past 3 Months Short Term (1 Year) Long Term (2-5 Years) Total Farm Loans Agricultural Lender Survey,
180 Non-Performing Loans Past 3 Months 160 140 Diffusion Index 120 100 80 60 40 20 0 Total Farm Loans Farm Real Estate Intermediate Operating Agricultural Lender Survey,
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Non-Performing Loans Short Term Expectations (1 Year) Total Farm Loans Farm Real Estate Intermediate Operating Agricultural Lender Survey,
Diffusion Index 200 180 160 140 120 100 80 60 40 20 0 Non-Performing Loans, Crop Sector Short-Term Expectations (1 Year) Corn & Soybeans Wheat Cotton Fruits/Vegetables Nurseries Agricultural Lender Survey,
180 Non-Performing Loans, Livestock Sector Short-Term (1 Year) 160 140 Diffusion Index 120 100 80 60 40 20 0 Dairy Hog Poultry Agricultural Lender Survey,
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 LENDER SURVEY
200 Past 3 Months Land Value 180 160 140 Diffusion Index 120 100 80 60 40 20 0 Agricultural Lender Survey,
Higher 25% Long Term (2 to 5 years) Land Value Lower 38% Same 37% Agricultural Lender Survey,
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 Brewer 765-494-4324 bebrewer@purdue.edu