Survey: Ag lenders confident despite financial challenges

ST. LOUIS — Agricultural lenders are seeing tighter farm profit margins and credit quality this year, according to a survey released Nov. 12 by the American Bankers Association and Farmer Mac..The survey of more than 450 ag lenders — taken this summer — was released Nov. 12 during the ABA Agricultural Bankers Conference. Fifty-two percent of borrowers expect to be profitable this year, with that number dropping to 50 percent in 2026, its lowest mark since 2020. The vast majority of lenders expect farm debt to increase over the next 12 months, which the ABA attributes to tighter working capital and increased reliance on credit. “Even with rising pressures, the agricultural sector remains fundamentally strong, and lenders are prepared to meet producers’ evolving credit needs,” according to the report.According to the U.S. Department of Agriculture, average net cash farm income for farm businesses is expected to increase 12 percent this year from 2024 to $127,000. However, preliminary farm income estimates project a significant decline for next year amid lower crop prices and continued trade uncertainty. Ag lenders cited credit quality and ag loan deterioration as their top concerns for this year, followed by lender competition and changing interest rates. The pace of farmland value growth slowed this year, with lenders expecting “a modest decline” in national average cropland values over the next year, according to the report. Nearly 70 percent of lenders were concerned about grain profitability, a substantial increase from 15 percent in 2023. Lenders were less concerned about beef and poultry operations due to strong demand and high prices, according to the report. “While delinquency and chargeoff rates remained relatively stable, lenders reported signs of deterioration and expected further declines in credit quality over the next 12 months,” according to the report. Despite the tightening financial environment, ag lenders approved 84 percent of loan applications over the past year and expect to renew 88 percent of existing loans in the coming 12 months, according to the survey. Demand for loans secured by agricultural production and farmland increased this year, with expectations for further growth in 2026. The survey “reflects a cautious outlook as financial pressures build on farm operations,” said ABA Research and Economic Policy Manager Ryan Lee. “Credit quality concerns have intensified, and lenders are preparing for a more challenging year by placing increased focus on underwriting standards and loan terms,” he added. “Despite these headwinds, lenders remain confident in the sector’s long-term strength and are committed to supporting producers through evolving market conditions.”