Outlook for ag lending: The market, the competition, and how bankers should respond

Bert Ely

American Bankers Association, 1993, vol. 07, issue 01

Abstract: Farm finances have improved significantly, and banks have enlarged their share of the agricultural credit market. Farming's inflation-adjusted total debt has declined by 50% since 1980 and looks to decline further, and net farm income has returned to its historical level in inflation-adjusted dollars per acre and has grown less dependent on government subsidies. However, total real value of farm real estate will continue its decline, and bankers must be wary that an overcapitalized Farm Credit System (FCS) does not again pursue reckless lending. As non-bank competitors may be able to offer borrowers lower rates, bankers must better meet ag borrowers' needs with improved services. Banks can offer farmers one-stop financial services and pursue ongoing communications with and education of farmer customers. Also, banks must effectively manage risk. In addition to scrutinizing FCS' efforts, banks must seek relief from their regulatory burden.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Date: 1993
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