Amid ongoing weakness in commodity prices, Midwest and Mid-South farm income and quality farmland values continued to decline during the first quarter of 2016, according to the latest Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis (8th District) on May 12.
Despite this, bankers surveyed said very few of their borrowers presented major repayment problems.
The bankers were asked to indicate the percentage of the dollar amounts of their farm loan portfolios in each of four repayment classifications. The vast majority of loans, about 78%, were classified as having no significant repayment problems. About 14% were classified as having minor repayment problems, with issues that could be remedied fairly easily.
Meanwhile, close to 7% were classified as having major repayment problems that would require more collateral and/or long-term workout arrangements. Only 2% were classified as having severe repayment problems that would likely result in loan losses and/or forced sales of real assets.
The bankers from the 8th District, which includes all or parts of the following seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee, were also asked to estimate the percentage of their customers who have borrowed up to their loan limit. On average, they indicated only 34% of customers had borrowed up to their limits.