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As lenders become more careful about granting loans to farmers, the cost of credit in rural areas is rising, according to Leland Strom, chief executive officer at the U.S. Farm Credit Administration. The FCA is an independent agency that regulates the banks and other entities of the Farm Credit System, the largest agricultural lender in the U.S.
Non-performing loans grew by nearly $500 million to $3 billion in the first quarter, indicating a need to lend more conservatively, Strom said Thursday at a congressional hearing in Washington, D.C. Even so, he says, the U.S. Farm Credit System remains well-capitalized, with a 7.9% increase in net income to $2.9 billion last year.
The lending environment will be more challenging than the system has faced in many years, he said. Agricultural producers have fared better than other parts of the economy during the financial crisis that has cost banks and businesses worldwide more than $1.47 trillion in write-downs and credit losses.
Debt loads for agricultural producers are the lowest in at least 50 years, according to government data.
