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Nov. 28, 2016 Source: Blog on Successful Farming's Agriculture.com Every agricultural gathering has a trade show. When I wandered through the exhibit hall at the National Agricultural Bankers Conference in Indianapolis last week, I noticed that the two friendly folks at the booth for agricultural mediation services weren't busy. For those of us who went through the farm debt crisis of the 1980s, that seemed like a good sign that we're not at that level of pain. Mediation between farmers and lenders in those bad-old days was meant to avoid legal proceedings against heavily leveraged farmers. A neutral mediator helped the lender and borrower find ways to work out of debt in a way that seemed fair to both parties. Maybe, I thought, we're still a long way from the farm foreclosures and bank failures of that time. When I returned to Iowa, I found that my impression was mostly correct. I visited with Stan Deardeuff, a regional coordinator with the Iowa Mediation Service, who has worked with farmers and lenders since 1987. Current conditions are much different from those in the 1980s, he says. Two years ago he started to see an uptick in defaults on equipment loans. There were about 250 ag mediation cases in Iowa then, and it doubled last year. "We have plenty of work, but we're not overwhelmed," he said. "We're not talking foreclosures. It's people with cash flow problems." The mood earlier in the week in Indianapolis was hardly one of panic, either. But lenders seem to be preparing for a closer look at farm loans that may be tougher to renew in 2017. A standing-room-only crowd went to the breakout session called "Deep Data Dive: Are Your Customers Positioned to Survive the Downturn?" Robert Craven, head of the University of Minnesota's Center for Farm Financial Management showed that farmers in the center's record keeping database are already cutting total production costs, including family living allowances. The cost of growing cash-rented corn in southern Minnesota was $786 per acre last year, an estimated $740 this year, and about $696 is projected for 2017. The net return on corn was a loss of $140 an acre this year, with a loss of $66 an acre projected for 2017. It's not surprising that another jammed session was "Maximizing the Benefits of USDA Programs," with a lot of questions about FSA loan guarantees that allow lenders to refinance some troubled loans. Veterans of the 1980s reassured the crowd that the turnaround time to approve those guarantees is much faster than it was 30 years ago. Those loan guarantees cost the federal government very little, but they have to be appropriated by Congress. At this point, it sounds as if stop-gap funding until April is on the table. That may not be enough to meet this winter's demand. Tweet |
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