Weaker Farm Economy Could Squeeze Agriculture Lenders

Leading agriculture lenders could feel the squeeze of a weaker farm economy thanks to heavy portfolios in farmland.

Fitch Ratings said this week in a report that farm lenders may see some assets deteriorate, but the relative strength of the Farm Credit System and a less volatile interest rate should ease the impact. Fitch does not expect the weaker farm economy to effect the ratings of the Farm Credit System or the individual banks in the system, according to Reuters. Fitch expects smaller banks with agricultural loan portfolios larger than five percent will begin increasing their loan provisioning in the coming months to help manage the agricultural slowdown, just as banks with larger exposure to the energy sector have done. Fitch also expects agricultural banks and lenders' loan portfolios to grow in the near to medium term, as farmers scramble to stay afloat.

Source:  NAFB News