FarmPolicy

May 24, 2019

Agricultural Economy; Food Banks; and Biofuels

Agricultural Economy

The latest edition of The Main Street Economist, a bimonthly newsletter published by the Federal Reserve Bank of Kansas City, included an article entitled, “Agricultural Credit Standards Tighten.”

The article stated that, “Agricultural borrowers are increasingly concerned about access to credit. Amid economic weakness and a financial crisis, commercial banks have tightened credit standards for various types of loans. While agricultural borrowers may be concerned about credit availability, agricultural lenders are equally concerned about the creditworthiness of agricultural borrowers as the farm economy weakens.

“As the financial crisis deepened, agricultural banks outperformed other commercial banks—but they still saw their profits decline. Despite questions regarding credit availability, commercial banks are extending credit to agricultural borrowers at lower interest rates. The soft erosion in agricultural loan quality, however, has led agricultural lenders to tighten credit standards and shift more financial risk to borrowers.

“The U.S. financial crisis has trimmed the profitability of agricultural banks and other commercial banks. However, agricultural banks performed much better than their banking peers. The strongest performance emerged from smaller agricultural banks.”

(more…)