Farmers Turning to Riskier Loans to Stay in Business

Dan Economy, Industry News Release

farmers

(NAFB) — Weather challenges, trade tensions, and long-term financial struggles continue to make life difficult in the U.S. agricultural sector. The Wall Street Journal says those headwinds are forcing an increasing number of farmers and ranchers to take on high-interest loans from lenders outside of the ag sector, just to stay in business.

The more traditional farm banks are offering less money and placing tighter restrictions on their loans. That’s forcing cash-strapped farmers to go to other lending sources for the capital they need to stay afloat. Financial services providers that are less regulated can offer significant help to producers. However, those loans can be treacherous to farmers that fall behind, with interest rates twice those charged by the more typical ag lenders.

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Heath Jobe is a farmer from Arkansas who recently lost a crop to dry weather. His loan payments carried a nine percent interest rate and piled up quickly, while his request for a new loan was rejected.

Producers are increasingly falling behind on their loans and it’s putting a squeeze on ag lenders too. Farmers face almost $416 billion in debt this year, which is the highest number since the 1980s farm crisis.

Source: National Association of Farm Broadcasters