Ag lenders are concerned about farm profitability in 2024, more so in 2025 and then see profitability returning in 2026, according to the American Bankers Association and Farmer Mac 2024 Agricultural Lender Survey results and key speakers at this week’s Ag Bankers Conference.

In the annual survey, ag lenders estimated that 58% of borrowers will be profitable this year, down 20% from last year. Leaders noted that survey results varied by region and major commodity types, with more optimism around livestock producers.

Surprisingly, lenders expect a larger percentage of ag borrowers in the west to be profitable. The percentage of profitable ag borrowers 2023 and expected profitability in 2024 and 2025 by region are:

Lenders are most concerned about grain farmers.

“Approximately 56% of respondents indicated they were very or extremely concerned in 2024, a large jump from the 15% of such responses last year,” the reports says.

Which commodities inspire confidence?

Grain’s bane is livestock’s boon. Lower grain prices delivered opportunity to dairy, beef and poultry producers. Half of the ag lenders were concerned about dairy borrowers in 2023. In 2024, that number dropped to 36% as prices rose and cost of production fell. Lenders have little to no worry about cattle and poultry producers.

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Of course, the numbers are national and individual farms likely saw different results. For instance, Pauline Van Nurden, an economist at the University of Minnesota Center for Farm Financial Management notes a dairy farmer hit with HPAI, or highly pathogenic avian influenza, had a tough year.

“We’re heard from a number of dairy folks in California, where HPAI is spreading, having an impact on production, and you’re not able to fully capitalize,” says Blaine Nelson, senior economist at Farmer Mac.

Nelson says: “Livestock in general, is really driving that positive end of the spectrum in terms of net farm income. … We're also seeing strong demand.”

Retail sales, Nelson says, are strong, despite a subset of consumers who are struggling financially. “Broadly speaking, a strong consumer right now continues to support that and be able to purchase that retail.”

Is liquidity drying up?

“The No. 1 concern facing lending institutions in 2024 was credit quality and agricultural loan deterioration,” according to the survey report. “Unsurprisingly, liquidity and farm income remained atop the list of lender concerns for producers.”

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That concern has no tangible result in 2024. “Ag loan delinquencies and charge-off rates remained stable in 2024,” the report says.

But lenders expect that to change – and quickly. “Lenders expect credit quality to deteriorate over the next 12 months, as farmers may face a more challenging environment in the year ahead.”

That concern will lead to a tighter credit environment. The survey reveals: “A higher share of lenders plan to tighten underwriting standards and loan terms for agricultural credit.”

That’s a combination that concerns economist David Kohl, professor emeritus at Virginia Tech, Blacksburg, Va.

“You've got inflated costs up, and you got interest rates that are double,” Kohl says. “They're not 1980s but they feel like 1980s. What's happening is our margin compression is making our losses accelerate, particularly on these bigger agricultural producers.”

As one of the founders of the Farm Financial Standards Council, Kohl is well familiar with the agricultural economic cycle.

In this stage of the cycle, Kohl says, “Your first choke point is going to be financial liquidity.”

He encourages producers to sharpen their business acumen, know their cash flows and work with their bankers. It’s all about attitude, Kohl says.

His mantra: “Take ownership of the numbers.”

Read the full report from American Bankers Association and Farmer Mac: 2024 Agricultural Lender Survey