The American Bankers Association (ABA) and the Federal Agricultural Mortgage Corporation (Farmer Mac) have released their joint 2024 Ag Lender Survey.
The big takeaway: lenders believe nearly 58% of farmer borrowers will be profitable in 2024. That’s down from the previous year’s study.
“The agricultural economy is inherently cyclical, and ag lenders are navigating the changing conditions across the sectors they serve,” said Jackson Takach, chief economist of Farmer Mac.
“While the responses highlight slowing land values and a profitability shift from crops toward animal proteins, ag lenders remain steadfast in leveraging their resources and relationships to guide producers through all parts of the cycle,” Takach says.
Profitability expectations did vary by region and commodity category. Optimism was greater for livestock producers over row crop farmers.
The two top concerns listed by lenders for agricultural producers are liquidity and farm income.
For lending institutions, the respondents said the biggest concern was credit quality along with agricultural loan deterioration in the next 12 months. “Agricultural credit quality remained robust in 2024, but lenders expect a slight deterioration in the coming year as farmers face a more challenging environment,” said Tyler Mondres, senior director of research at the American Bankers Association. “Lenders are taking prudent steps to manage risk such as tightening underwriting standards, and they remain committed to working with and supporting their borrowers.”
Demand for loans secured by farmland and agricultural production loans increased in 2024, and both categories of loans are expected to rise in the next year as well.
The ABA/Farmer Mac survey has been conducted for nine years, and this year’s responses included more than 450 ag lenders who represent institutions ranging from less than $50 million to more than $1 billion.
EDITOR’S TAKE:
Sure, it could be better news but, given the current prices for some of the major commodities like corn and soybeans, this is a pretty decent outlook. It’s worth noting that the loan quality remains high. Despite some of the bankers’ concerns over deteriorating loans, it hasn’t happened yet. In addition, the outlook for livestock and dairy operations (as reported in prior issues of the AIR) remains strong for at least the coming year and probably beyond. Yes, farmers/ranchers will be a bit more cautious as they manage their spending in 2025, but many will have significant cash flow and will be seeking tax relief by purchasing new equipment or trucks. For those farmers/ranchers who are less profitable in 2024, be sure you emphasize how AgPack® can help lower their operating expenses and provide them with a great return on their truck investment.
