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U.S. Farming Has A Banking Problem

Banks-pull-back-from-farm-loans

The latest jobs figures propel the lengthy period of corporate optimism in the U.S. today, with hiring stronger than expected in June. While concerns over a possible upcoming economic recession are beginning to seep into the corporate world, and while smaller businesses are struggling to find adequate talent to grow, overall, some economists welcomed the most recent payroll figures from the U.S. Bureau of Labor Statistics, ADP, and others.

Yet when the U.S. reports on jobs figures, the data excludes professions in the farming and agriculture industry.

According to Marketplace, that practice began in the mid-1800s when the majority of farm work was done by the farm owner and their family. Analysts note that today, the percentage of professionals working in the agricultural sector remains so low that including them in national jobs calculations would not have a statistically relevant effect on overall analysis.

“As the economy’s picked up in construction and other areas, fewer people are willing to do farm work,” explained Dan Sumner, an agricultural economist at University of California, Davis, in an interview with Marketplace in May. “It’s hard work at relatively low wages.”

While government jobs data excludes the farming sector, recent analysis from Reuters reveals that the industry may not be enjoying the strength of the U.S. economy like other verticals.

According to Reuters reports last week, large financial institutions are pulling back from the farming industry after surging in to expand their loan portfolios in the wake of the global financial crisis.

Focusing on the rural Midwest, large banks like JPMorgan Chase & Co. expanded their financing to farming businesses significantly between 2008 and 2015, according to filings with the Federal Deposit Insurance Corporation analyzed by Reuters.

That pullback comes amid cash flow concerns for farmers impacted by U.S.-China trade tensions, with analysts noting that bankruptcies and early retirements are on the rise.

“My phone is ringing constantly. It’s all farmers,” bankruptcy attorney Barbara May told the publication. “Their banks are calling in the loans and cutting them off.”

“If you have any signs of trouble, the banks don’t want to work with you,” Gordon Giese, a dairy and corn farmer told Reuters. “I don’t want to get out of farming, but we might be forced to.”

Below, PYMNTS breaks down the key data points from Reuters’ analysis on the farming sector’s banking challenge.

$427 billion: the value of farm debt this year, up from $317 billion a decade earlier (figure adjusted for inflation). The U.S. Department of Agriculture warns that this figure is approaching debt levels seen ahead of the 1980s farm crisis.

3.9 percent: the growth rate of FDIC-insured bank loans to farm borrowers as of March 2019. That growth rate has been declining: In December 2015, it was 6.4 percent, reports said, noting FDIC insured banks account for about half of all farm loans.

$1.1 billion: the value of JPMorgan’s farm loan portfolio in 2015, a 76 percent increase from 2008. They aren’t the only Wall Street bank to see farm loan portfolios soar during that time, either, Reuters said — nor are they the only the bank to see farm lending plummet in recent years.

$18.3 billion: the amount of money lent to farm businesses as of March 2019, a 17.5 percent drop from December 2015 levels. Between December 2015 and March 2019, banks pulled back their farm lending by $3.9 billion. Capital One Finance Corp. saw its farm-loan holdings drop by 33 percent during this time, while U.S. Bankcorp’s declined by 25 percent. JPMorgan, meanwhile, saw holdings decline by 22 percent.

498 Chapter 12 federal court filings were submitted in 2018, up from 361 filing sin 2014, Reuters said, citing federal court records of the bankruptcy protection filings.

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