Wall Street Bails on Ag

In the wake of the U.S. housing meltdown of the late 2000s, JPMorgan Chase & Co. searched for new ways to expand its loan business beyond the troubled mortgage sector. The nation’s largest bank found enticing new opportunities in the rural Midwest—lending to U.S. farmers who had plenty of income and collateral as prices for grain and farmland surged.

JPMorgan grew its farm-loan portfolio by 76 percent, to $1.1 billion, between 2008 and 2015, according to year-end figures. Other Wall Street players piled into the sector as well.

But now—after years of falling farm income and a U.S.-China trade war—JPMorgan and other Wall Street banks are heading for the exits, according to a Reuters analysis of the farm-loan holdings they reported to the Federal Deposit Insurance Corporation (FDIC).

The agricultural loan portfolios of the nation’s top 30 banks fell by $3.9 billion, to $18.3 billion, between their peak in December 2015 and March 2019, the analysis shows. That’s a 17.5 percent decline.

Meanwhile, total U.S. farm debt is on track to rise to $427 billion this year, up from an inflation-adjusted $317 billion a decade earlier and approaching levels seen in the 1980s farm crisis, according to the U.S. Department of Agriculture.

Surveys show demand for farm credit continues to grow, particularly among Midwest grain and soybean producers, said regulators at the Federal Reserve Banks of Chicago, St. Louis, Minneapolis and Kansas City.

Chapter 12 federal court filings, a type of bankruptcy protection largely for small farmers, increased from 361 filings in 2014 to 498 in 2018, federal court records show.

The decline in farm lending by the big banks has come despite ongoing growth in the farm-loan portfolios of the wider banking industry and in the government-sponsored Farm Credit System. But overall growth has slowed considerably, which banking experts consider a sign that all lenders are growing more cautious about the sector. Source: Reuters