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Sunday, May 24, 2009

Credit crunch finally reaches agricultural lenders

"The credit crunch is trickling down to the farm as agricultural lenders tighten credit standards, leaving some farmers short of money to feed their animals or put in crops as the planting season nears its end," Lauren Etter reports for The Wall Street Journal. "Deepening slumps in the livestock, dairy and ethanol industries have contributed to mounting troubles for rural lenders. That is making it harder for some growers to borrow money they need to buy seed, fertilizer, equipment and animal feed."

In some places, local bank failures, takeovers or other difficulties have left farmers without lines of credit. USDA's Farm Service Agency, a lender of last resort, "made about $728 million of direct operating loans for the fiscal year ending Sept. 30, up nearly 70 percent from a year earlier" and the highest in 20 years, Etter reports."The Farm Credit System, a federally chartered network of five banks and 90 borrower-owned associations, reported a nearly 20 percent decline in its first-quarter 2009 combined net income." The system's Omaha-based bank set aside $29.5 million for potential loan losses, up exponentially from $583,000 last year. Bank President Douglas Stark told Etter, "Certainly, we would look at new requests for credit with a much more critical eye." (Read more)

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