Economic Impact of Crisis Felt by Ag and Dairy Lenders

...Schulte said his goal is to put farmers in a better position financially, but banks are beginning to feel pressure from regulators and the FDIC. "When they come in, we have to have a really good explanation as to why we continue to refinance the operating notes." Michael Lochner, economic specialist with the Wisconsin Department of Agriculture, Trade and Consumer Protection, also is feeling mounting pressure of the crisis as he and his coworkers struggle to help counsel farmers through the crisis. The majority of calls routed to his office used to focus on transition planning, or how to pass the farm to the next generation. Now, he said, the majority of those calls consist of farmers who are financially stressed and seeking help. The definition of financial stress has a wide range, but a large percentage of the calls come from those who are on the severe end of the spectrum or feeling pressure from a lender because they're more than 60 days past due on loan payments. That status could lead a producer to foreclosure or bankruptcy. n 2019 so far, the number of farm closures has reached three per day, the La Crosse Tribune reported. The decrease in the number of agriculture producers led to an increase in the number of implement dealers, such as grain suppliers, equipment manufacturers and distributors, as well as veterinary services, all staples of rural economies, that have closed or consolidated...Stephen Bianchi, president and CEO of CCF Bank, a community bank that serves rural Wisconsin and Minnesota, recognized the symptoms of a suffering rural economy due to his past experience as a banker in South Dakota. "When farmers were having good years, they were in town buying pickups, making improvements to their homes, to their farms," he said. "That economic activity in our towns, in our dealerships tends to diminish as a cycle like this (current crisis) plays out." Today, farmers hold on to their equipment longer, they're not making the investments they used to make. Mark Stephenson, director of dairy policy analysis at University of Wisconsin-Madison, agreed with Bianchi's assessment. If producers earn a dollar selling milk, that dollar is spent on services such as veterinarians, or to buy groceries or tools at the local hardware store. When the milk price is down and those dollars earned are down, it does have an effect on the local economy, Stephenson said. "As we have financial distress on farms, it ripples through these rural communities," he said...MORE