A recent report says banks could be more hesitant to lend to the farm sector just as the agricultural industry is expected to enter a major credit crunch. Rabobank says that could disproportionately hurt smaller producers in the process. After two years of near-record profits, a significant drop in crop prices is pushing more producers to take out loans. Although farmers have built up somewhat of a liquidity buffer to manage the downturn, Rabobank says those savings are expected to run out by the next crop year.
The report says “Although the U.S. agricultural sector’s financial affairs are projected to finish 2023-2024 in stable condition, the trajectory is downward.” Demand for farm loans is set to climb to levels not seen since 2013 with producers expected to increase their borrowing by billions of dollars over the next several years. Producers may face stricter borrowing requirements when taking out new loans.