Wisconsin agricultural bankers gave a glimpse of what 2020 holds for ag lending and highlighted the current challenges facing their customers in the latest WBA survey.
Agricultural lending increased in 2019 and is expected to continue to increase in the upcoming year. According to responding agricultural bankers, the volume/portfolio of ag loans grew in the past year for 44% of respondents while another 34% indicated the volume had stayed the same. Additionally, 53% anticipate there will be an increase in ag loans in 2020 with 31% indicating the current levels will continue for the near future.
Loan restructures increased according to 46% of respondents in 2019 compared to 2018. A similar margin, 48%, indicated restructure levels stayed the same during the same timeframe.
Liquidity topped the list of concerns ag bankers had for conditions facing their borrowers. Ranking as an extremely close second and third, farm-level incomes and uncertainty around tariffs and trade were top of mind as well. Weather, farm labor (cost or availability), total leverage, third-party financing, land rents, and interest rate volatility all ranked much lower in the poll.
When asked about specific agricultural segments, dairy was the highest-ranked area of concern for ag bankers by a wide margin. Grains, beef cattle, swine, vegetables, fruits and nuts, and poultry all ranked much lower.
As for land prices, 78% of respondents expect them to stay the same in 2020 while only 4% predict an increase. However, dairy building site values are expected to decrease in the same timeframe as predicted by 82% of respondents. No ag banker believed these prices would increase in the new year.
Top Concerns on Conditions Facing Customers
- Farm-level incomes
- Uncertainty around tariffs and trade
- Farm labor (cost or availability)
- Total leverage
- Third-party financing
- Land Rents
- Interest rate volatility