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Ag lenders preparing for continued farm profitability declines

A recent survey of ag bankers finds credit quality is their top concern as producers face lower net farm incomes.

American Bankers Association’s senior director of research Tyler Mondres tells Brownfield, “Despite the fact that there is an expectation for credit quality to weaken a little bit in 2025, banks are taking prudent risk management steps to manage that risk, whether it’s tightening their underwriting standards or looking a little bit more closely at the financials of their borrowers.”

He says bankers expect 58 percent of their borrowers to remain profitable this year, down 20 percent from 2023.

“I think that what folks are generally expecting is given farm profitability has fallen you’re likely to see an uptick in demand among those borrowers who are more dependent on debt financing to finance their operations,” he shares.

Mondres says interest rate cuts could help alleviate some farm profitability pressures.

The survey also found most lenders expect land values and cash rents to plateau or decline over the next year.

The Ag Lender Survey report is a joint effort of the American Bankers Association and the Federal Agricultural Mortgage Corporation, or Farmer Mac.