WI Agricultural Bankers: 2020 Lending Levels Will Be Higher; Top Concerns Include Liquidity, Income, and Uncertainty Around Tariffs and Trade

Ag Banking Survey on Current and Future Trends in the Agricultural Economic Landscape

(Madison) – A recent poll of Wisconsin’s agricultural bankers by the Wisconsin Bankers Association spotlights the good and the bad of Wisconsin’s agricultural community as well forecasts what the future may hold for the Badger State.

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 agricultural 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. Ranked much lower as an area of concern were grains, beef cattle, swine, vegetables, fruits and nuts, and poultry.

78% of respondents expect ag land prices to stay the same in 2020 while only 4% predict an increase in prices. 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.

“Bankers value the farms, agribusiness, and hardworking people that make up the communities they serve,” said Rose Oswald Poels, WBA President and CEO. “It’s important for the ag community to have Wisconsin banks to help them through these tough times. Bankers are dedicated to serving their ag customers, even when a loan or other financial product isn’t the best solution.”

“One of our members said it best. ‘In these difficult times, just being there to listen is the most important thing we do. Saying yes is easy, saying no is difficult… and sometimes no is the most honest answer.’”

Below is a breakdown of the survey questions and responses contributed by 50 agricultural bankers from around the state.

 

What percentage of your ag borrowers are currently profitable?

 

0-20%

12%

21-40%

28%

41-60%

28%

61-80%

24%

81-100%

8%

 

 

What percentage of your ag borrowers will remain profitable through 2020?

 

0-20%

4%

21-40%

22%

41-60%

27%

61-80%

37%

81-100%

10%

 

 

Over the past year, has your volume/portfolio of ag loans:

 

Increased

44%

Stayed the same

34%

Decreased

22%

 

 

For 2020, do you anticipate volume/portfolio of ag loans will:

 

Increase

53%

Stay the same

31%

Decrease

16%

 

 

What percentage of your ag loan customers needed to have their loans restructured in 2019?

 

0-20%

42%

21-40%

38%

41-60%

18%

61-80%

2%

81-100%

0%

 

 

How does the number of restructures done in 2019 compare to the restructures in 2018?

 

Increased

46%

Stayed the same

48%

Decreased

6%

 

 

How many of your ag customers have fixed rate loans, greater than 3 year terms?

 

0-20%

20%

21-40%

16%

41-60%

26%

61-80%

28%

81-100%

10%

 

 

How many of your ag customers have fixed rate loans, greater than 5 year terms?

 

0-20%

46%

21-40%

26%

41-60%

12%

61-80%

12%

81-100%

4%

 

 

Please indicate your relative level of concern for the following conditions facing your ag borrowers currently (the lower the number score, the higher the concern):

 

Liquidity

1.6

Farm-level incomes

1.8

Uncertainty around tariffs and trade

1.9

Weather

2.1

Farm labor (cost or availability)

2.3

Total leverage

2.4

Third-party financing

2.6

Land Rents

2.8

Interest rate volatility

3.1

 

 

Please rate your relative concern for ___ in your area currently (the lower the number score, the higher the concern):

 

Dairy

1.6

Grains

1.9

Beef cattle

2.5

Swine

3.3

Vegetables

3.5

Fruits and nuts

3.6

Poultry

3.7

 

 

What is your expectation of ag land prices in the next year?

 

Increase

4%

Stay the same

78%

Decrease

18%

 

 

What is your expectation of dairy building site values in the next year?

 

Increase

0%

Stay the same

18%

Decrease

82%