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How an economic downturn can influence ag borrowing and lending

An economist at Rabobank says the tighter margins and economic uncertainty have farmers looking for more ways to finance their operations.

Owen Wagner is the vice president of oils, grains, and seed analysis.

“During COVID, we saw lower demand for operating lines of credit,” he says. “It fell sector wide fell by about $25 billion, so a massive decline in the demand for borrowed money. But then in Q1 of this year, we saw a 14% uptick.”

He tells Brownfield increased borrowing gives famers more flexibility to focus on their operations. 

“Farmers have exhausted some of the low hanging fruit of cutting costs and now they’re having to borrow money,” he says. “Things as simple as corn margins are very effective leading indicators for the amount of demand  for borrowed money, particularly for operating expenses.”

Wagner says despite the recent uptick in ag lending, he expects the ag sector to remain stable through the end of the year.