So far farm loans are holding up well, but bankers gathered at an industry conference this week said they are growing increasingly concerned that credit quality will weaken if the U.S. and China don’t reach a deal soon.
Banks are taking back more farmland through foreclosure than at any point in the past three years as low crop prices, epic flooding and the Trump administration’s trade spat with China have left many farmers struggling to pay their debts.
President Trump is expected to sign legislation soon that would expand the number of farmers who could file under the more lenient Chapter 12. Ag lenders are worried because farm bankruptcies recently rose and the trade war with China could worsen.
County Bancorp is a small dairy lender in Wisconsin with an exposure to milk prices, and Bank OZK is a larger bank in Arkansas coping with out-of-market real estate trends. Their stories show how market sensitivities can vex specialists.
America's farms have taken on near-record levels of debt in recent years, and commodity prices and trade wars are putting pressure on farm country. That could spell bad news for bankers that lend to them.