Area ag bankers see a rocky economic outlook
GRAND FORKS, N.D. — An informal survey of northeast North Dakota and northwest Minnesota agricultural lenders found concern about the financial condition of many of their clients. But the survey also identified one reason for optimism.
About 90 area bankers attended the annual North Dakota State University Extension Outlook Conference for Agricultural Lenders Oct. 28 in Grand Forks. The event allowed ag bankers to hear insights from Extension specialists about crop prices, land values and other ag topics.
As in the past, Extension conducted an anonymous electronic survey in which the bankers in attendance were asked for their estimate of how their clients will fare in the coming year.
"We're trying to get a feel for what's the financial status of your clienteles. What you think might be coming in the near future and knowing that there will be some folks who will have serious financial troubles this year. We're trying to figure out how many folks are backed up near the cliff," said Frayne Olson, Extension crop economist/marketing specialist, who helped to lead this year's survey.
Much of the area served by the ag bankers at the Grand Forks conference was hit with a cold, wet spring that delayed planting and put crops behind their normal maturity. An exceptionally wet fall, which included repeated heavy rains and even an October blizzard, has exacerbated harvest worries — many fields may not be harvested at all — and increased financial concerns associated with poor commodity prices.
That's reflected in survey results, which included the following.
• Loan volume, i.e., farmers wanting to borrow more money, will grow in 2020 — 45% of bankers predicted a slight increase, with 40% expecting a modest increase. The rest of the bankers anticipated no increase or a significant increase.
• Land and machinery prices are expected to drop in the next year. Some bankers predicted small to moderate declines, with a few lenders anticipating larger declines.
• At least a few ag producers, who are breaking even or losing money, likely will go out of business voluntarily in 2020, the bankers predicted.
• Some ag producers won't be able to get financing to put in their 2020 crop. A few ag bankers predicted that a relatively large percentage of farmers won't get financing, though the majority of lenders estimated much smaller numbers.
• Some farmers will need to restructure or refinance debt for the first time in 2020. Again, some bankers anticipated a relatively small percentage of ag producers will need to do so, with a few of the lenders predicting a larger percentage.
But some farmers are in good shape financially and have been waiting for the best time to expand their operations — which potentially could happen in 2020, Olson said,
"Guys who have been sitting back and waiting for the right time, keeping their powder (financial resources) dry," Olson said.
The survey found that many of the bankers have at least a few clients who fall into that category.
"We (area ag in general) have some problems, some issues to deal with. But there might be some people sitting on the sidelines waiting for the right deal," Olson said.
Those farmers — by propping up demand for farmland — potentially could moderate the decline of farmland values and rental rates, he said.