Farmers Feel Squeeze From Lenders
With the farm slump moving into its third year, banks have become more cautious about approving loans to farmers, requiring some growers to offer more collateral and sometimes denying financing outright to others who need it for seeds, crop chemicals or rent.
With traditional bank loans harder to find, farmers are turning to sources like CHS Inc., a farmer-owned cooperative in the U.S., which operates grain elevators and retail stores across the Midwest. CHS said its loans to farmers increased 48 percent in both number and volume in the 12 months to March and have more than doubled since 2014.
It “suggests there are many farmers struggling to obtain financing,” said Randy Nelson, president of the co-op’s financing subsidiary, CHS Capital.
| The Chicago Fed earlier this year said the volume of the district’s farm-loan portfolio with major or severe repayment difficulties hit 5 percent in late 2015, which compares with 2.9 percent a year earlier and is the highest in more than a decade. |
Farmers typically take out loans in the first three months of the year before spring planting begins. But this year, growers, including some who have been turned away by their primary lenders, have been searching for financing as late as April.
“There’s hardly a day that goes by that I don’t get approached by someone turned down by another bank,” said Grant Lindell, vice president of First United Bank in Michigan, N.D.
As late as May, Lindell said he still was working with several longtime customers to help them make ends meet by selling equipment or taking out a mortgage on their land.
Farmers also are seeking more help from the government. Demand for loans from the Farm Service Agency, an arm of the U.S. Department of Agriculture that administers financial support to growers, is projected to increase 23 percent in 2016, according to the USDA. That rise in part reflects banks’ requests for government guarantees on farm loans.
Source: Wall Street Journal S