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Survey of rural bank CEOs reflects some concerns

Increased farm loan rejection rates are being reported by more Midwestern banks. And almost two-thirds say they’ve increased their collateral requirements on farm loans in reaction to weak farm income.

Creighton economist Dr. Ernie Goss, who surveys bank CEOs each month for the Rural Mainstreet Index, says while that’s a concern, it’s not quite as dire as it sounds.

“We’re still seeing default rates, the foreclosures, the late payments, (are) still not very high,” Goss says. “In other words, the farmers came into this economic downturn—if you want to call it that—with pretty good balance sheets.”

But Goss says farm borrowing has increased—and he says rising interest rates are a concern.

“We’ve got the Federal Reserve on the path to raise rates another two times this year. That will put the rates up by a half a percent,” he says. “So borrowing costs are growing significantly for businesses and agricultural operators out there. That’s going to add some additional stress.”

The survey also showed that, on average, bankers expect farmland prices to decline by two percent over the next 12 months.

AUDIO: Ernie Goss