Farm debt is rising at an alarming rate

by | Nov 20, 2019 | 5 Ag Stories, News

When you have a year of low commodity prices, natural disasters, or trade wars, it can affect a farmer?s bottom line. If you are piling up consecutive years of more than one of these challenges, it can lead to a crisis for farm operations. Farmers are having trouble reworking their debt and securing capital to start the 2020 year. Some are turning to less than conventional lending sources, which could further jeopardize the future of the farm. Iowa Congresswoman Cindy Axne (D-3rd) had some questions for the Chairman and CEO of the Farm Credit Administration (FCA), Glen Smith, in the committee chambers.

Audio: Full conversation between Congresswoman Axne and Chairman Smith

Congresswoman Axne started out her questions by highlighting the alarming numbers we are seeing for the expected levels of farm debt.

Smith, an Atlantic, Iowa farmer, talked about the push they are making to encourage lenders to find ways to work with these financially stressed farmers, to help them find a way forward.

However, the decision still comes down to the decision of the individual lender.

Axne also discussed the rise in high-interest loans that farmers are turning to. Many of these are compared to ?payday loans? which put the operation at the mercy of high-interest rates and loan terms which are sometimes just barely inside the realm of legality.

Smith says he feels there is a good balance of offerings. However, some farmers are looking to some of these high-risk, high-interest alternatives because they don?t see any other options available.

In other testimony, Smith did say the situation we are seeing now is eerily like what started out the farm crisis of the ?80s. Then it was a trade dispute with the Soviet Union over embargos. We also saw decreases in land values and rising debt-to-asset ratios. Much of which is being mirrored now. Hopefully, lessons learned in the ?80s can prevent a repeat of the same mistakes and results.