Speculation has been abundant as we close out 2014 that the ag lending sector is a bit nervous. Reportedly, bankers are worried about the drop in farm profits and the repayment capacity of their borrowers. While that may be the case for some banks and some commodities, Doug Stark, President and Chief Executive Officer of Farm Credit Services of America, isn’t so pessimistic. He says it’s all cyclical.
Grain prices have obviously taken a beating this year. That said, we’ve had several years of strong prices driven by both supply and demand. A strong production year in 2014 has impacted prices, but Stark emphasized in a recent Northern Ag Network interview that this is just one year in constant cycle.
For livestock, we are in the peak of the good times. Stark, however, did warn producers that this welcome blessing isn’t never-ending. According to Stark, “Don’t count on this forever.” He advises folks to pay down debt or build up working capital. Basically, get yourself in the position that you need to be in to withstand the other side of the cycle.
Stark doesn’t think lending will be a problem whether producers are experiencing the high or low end of their respective cycle. The producers he’s working with, he says, are well-positioned. He added that most lenders had been conservative when the grain markets were high. This has allowed them to be supportive now that the prices are lower. A similar situation is unfolding now with the record livestock prices.
© Northern Ag Network 2014
Haylie Shipp
