A West Coast road trip to speak to the Washington Agricultural Bankers’ program allowed me to share the podium with John Blanchfield, director of the American Bankers Association’s Center for Agricultural and Rural Banking. John, in his usual energetic style, presented some interesting points about the banking industry:
Banks have sufficient funds to make farm loans in 2009 and beyond; however, it is not going to be business as usual, with more conservative assessments in working with borrowers.
Ninety-eight percent of the over 8,400 banks are well-capitalized, with many being agricultural banks.
Farm equity now exceeds $2 trillion dollars, nearly doubling in this decade. Much of the increase is the result of appreciation in farmland values.
Farm debt is now $2.5 billion dollars and is being serviced by record profits of 2008, which are projected to be down by 17% in 2009. This is still much above average.
The percentage of farm assets financed by debt is now 9.1%, a record low, and down from 15% in 1991.
Land values nationwide increased by 8%, with much of the increase resulting from double-digit price increases in the Midwest.
John left the audience with his former conservative upstate ag banker perspective: What goes up can come down. Be prepared for changes in government programs as they relate to agriculture and ag lending.