CHICAGO, Ill. (RFD News) — Financial pressures are building in farm country as credit conditions weaken across the Upper Midwest.
David Oppedahl with the Federal Reserve Bank of Chicago says a number of farmers are having trouble repaying their loans.
“There are certainly issues with cash flow that are challenging repayment of loans. There has been an increase in the number of loans that are facing both problems of a severe and a higher category. There are fewer that are not having any repayment problems, though that’s still almost 90%. The vast majority of loans are not seeing repayment problems, but the problem ones are creeping up again to a little higher level after some really low years.”
Instead of taking out loans to expand their operations, Oppedahl says many farmers are using debt to keep cash flowing.
“I think it’s really kind of been a period where they’ve had to take out operating loans, and there’s a lot of interest in those. Our data shows an increase in demand from a year ago that’s been consistent over the last few years as working capital is tight right now for many operations. You have to delay some of the other kinds of uses for your loans that you might have normally bought a new tractor or done something with purchasing some additional ground or build some grain storage things like that.”
Looking ahead, Oppedahl says lenders will be watching closely for signs of improvement in farm income.
