Even with crop prices at an all-time low, farm lenders say current agriculture conditions do not compare with the devastating crisis that struck farmers in the 1980s.
A successful run by farmers this decade, an overall strong harvest expected this year, and the preparedness of banks should keep the industry afloat this time around, they said.
The bankers addressed the media Thursday at an American Bankers Association-sponsored event before meeting with Agriculture Secretary Dan Glickman. The secretary asked that they brief him on farm conditions at a time when overseas economic troubles have reduced demand for U.S. farm products and depressed their prices.
Congress this week approved more than $4.1 billion of emergency aid to farmers so that they can maintain cash flow and repay bank loans.
Bankers said strong harvests throughout the decade have let farmers reduce debt overall. An ABA analysis said total farm debt at Dec. 31 was $166 billion, down from nearly $200 billion in 1984 at the peak of the crisis.
And the bankers lending to farmers are in better shape as well. Farm banks' average capital ratio now is about 10%, and computers have let bankers better predict what farmers can afford, lessening the chances that a borrower will take on too much debt.
"Banks, the government, and most importantly, our customers are more proactive today than in the 1980s," said Dennis Everson, senior vice president for agriculture finance at $285 million-asset First Dakota National Bank, Yankton, S.D. He said everyone now is looking for problems ahead of time, "compared to in the 1980s, when we were reacting to problems, not knowing what the next day would bring."
The federal assistance should reassure farmers that despite the down year funds will be available for next year's growing season.
Terry Barta, senior vice president for credit services at Smith County State Bank and Trust Co., Smith Center, Kan., said every store in town would suffer if farmers tightened their belts in anticipation of a down year followed by no assistance. "Our Main Street thrives on the success of our farm families," he said.