Farm Credit lenders in key commodity producing regions say farm financial performance is expected to decline in the remainder of 2014 as commodity prices turn lower, though changes in the 2014 Farm Bill will likely be neutral for many producers, according to an Agribank poll.
AgriBank, St. Paul, Minn., conducted the poll in July among chief credit officers for the Bank and its 17 affiliated Farm Credit Associations, which provide agricultural loans in a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas.
Sixty-seven percent of those surveyed said farm financial performance would generally be slightly worse this year compared to last year, while 22% said it would be worse.
Several poll respondents noted that farm financial performance will differ among different market segments.
"The poll reflects the reality that grain commodity prices are lower compared to last year, which will likely have some negative impact on profitability for crop producers this year," said Jerry Lehnertz, vice president, lending for AgriBank. "On the flip side, most crop producers have entered this lower commodity price environment with strong overall financial positions."
Lehnertz said producers who purchase grains as inputs for dairy products, ethanol, livestock and poultry, however, may see increased profitability resulting from the lower grain prices.
2014 Farm Bill implications
When asked to rate the 2014 Farm Bill's effect on the financial success of their borrowers on a scale of one to 10, with one being negative and 10 being positive, survey respondents gave an average rating of approximately five.
Many Farm Bill implementation details have yet to be determined and, with the elimination of direct payments, crop producers will have to choose between several programs that provide income support under adverse price or yield conditions.
More than 76% of the chief credit officers surveyed said farmers are talking to their Farm Credit lending officers (or crop insurance specialists) about how the new Farm Bill will affect their operations.
"Producers are actively discussing the Farm Bill, even as many program details have yet to be determined," Lehnertz said. "The Farm Bill is just part of the equation when it comes to farm finances and risk management."