Profit

Farmers profit, inflation becomes the main concern

COLUMBUS, Ohio – Farm lenders report profits.

That’s according to the American Bankers Association’s Fall 2021 Agricultural Lender Survey.


What would you like to know

  • Farm Lenders Report Profits, American Bankers Association Survey Finds
  • Lenders said the overall profitability of farms increased from the previous year.
  • Each week, Chuck Ringwalt and Andy Vance discuss a topic of importance to agriculture

Spectrum News 1 presenter Chuck Ringwalt spoke to agricultural expert Andy Vance about the results.

Ringwalt: “One of the main lessons of the survey is that a majority of (agricultural) lenders reported an overall increase in agricultural profitability compared to the previous year. Andy, this is good for the lenders, but can you explain what this means for the farmers? “

Vance: “Of course. And to point out the reason, it’s good for lenders, it’s because farmers can afford to repay their loans, which is obviously a major concern for lenders. For farmers, this means that we can make money doing that thing that is part of our livelihoods or our family history or whatever the reason they are involved in farming. This is the first time since 2016 that the lender survey found that a majority of lenders expected a majority of their clients, their clients, to be profitable. Think about it. We are talking about five years when a majority of borrowers were not supposed to be profitable, according to their bankers. It’s a long time not to be profitable, so being able to go into the dark is definitely a big deal for any business, especially one as essential as farming and farming.

Ringwalt: “Got it. Although there has been an increase in profits, the survey indicates that government assistance is a contributing factor. If that aid dries up and farmers face an economic downturn or inflation, does the report predict whether they will be able to make their payments or if they will not repay their loans? “

Vance: “Yeah, I would say the inflation issues, according to the report, and certainly from the people I’ve spoken to are really high and increasing now. Sometimes it’s hard to separate the signal from the noise, like how worried people are because they’re actually seeing inflated prices for various things compared to “Hey, I’ve heard a lot about this in the news or on social networks ”. But generally speaking, if you look at agricultural inputs, especially fertilizer prices, energy costs; the increase in the cost of energy, in particular fuel, is a real concern. Farmers who are in the field and are now finishing the harvest are seeing this every time they go to fill their diesel tanks. They know it’s more expensive than the last time they filled those tanks, so these are very real concerns and could absolutely hamper profitability over the next two, three, or four years, depending on how the business progresses. global inflation.

Ringwalt: “Got it. When we look at the farmers right here in Ohio, when you talk to them, what is their overall situation like? Are they barely making ends meet or are they able to see into the future? “

Vance: “One of the things to understand is that it varies greatly depending on the percentage of household income that comes from farming. In other words, the number of people who live on agriculture, or perhaps in a two-earner household, both spouses derive their income from the farm. It’s a relatively small number. Nowadays, most farms have some kind of additional farm income. Either a spouse who works in the city, so to speak, as they say, or the main operator. Maybe the farm is more of a hobby, although it could be a very big hobby for several hundred thousand dollars a year. They have income off the farm, so it really depends on their overall situation before the pandemic. Were they able to keep their jobs? Many farmers may have manufacturing jobs. Were they facing a loss of income from the pandemic there? So it varies very widely depending on their overall financial situation. “


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