Pub. 14 2019-2020 Issue 2

WWW.NEBANKERS.ORG 24 Shedding Light on the Farm Credit System, America’s Least Known GSE © 2019 Bert Ely BERT ELY’S FARM CREDIT WATCH® Is the FCS Understating Its Emerging Credit-Quality Issues? A S BANKERS KNOW ALL TOO WELL, FARMERS AND RANCHERS are suffering froma sustained period of low commodity prices, rising input costs, heavy rains and flooding, and more recently, trade issues that are harming agricultur- al exports. Not surprising, those factors have hurt farm income, which peaked in 2013. As in past cycles, sustained declines in farm income lead to increased cash-flow problems for farmers and ranchers, which in turn lead to rising credit-quality prob- lems for ag lenders. As the late FCA Chairman Tonsager stated in his last speech, “the farm economy continues to deteriorate.” One indicator of the financial stress farmers are experiencing—a recent report stated that the delinquency rate on direct loans made by the USDA’s FarmService Agency was 19.4% in January of this year compared with 16.5% a year earlier. Even though the FCS focuses on lending to financially stronger farmers, a key question is how well the FCS is acknowledging growing credit-quality problems in its loan portfolio and/or shed-