Survey: Midwest Bankers Showing Increase in Farm Loan Rejections

A recent survey of Midwest bankers shows a “significant increase” in farm loan rejections. Creighton University professor Ernie Goss surveys the presidents and CEOs of rural banks in Iowa and nine other Midwest states. He found nearly 43 percent of initial farm loan applications had been rejected as bankers react to weak farm income. The financial pinch will be compounded this fall, according to Goss, who expects the Federal Reserve to raise interest rates.

“We’re likely to see short-term interest rates, from our survey, maybe growing by as much as three-quarters of a percent by the end of the year,” Goss says.

Goss says the overall Midwest economy is growing, but concerns about trade “skirmishes” are slowing that growth. Goss predicts farm equipment sales may soon take a hit.

“For Iowa, you’ve got agricultural equipment manufacturers that are certainly big users of aluminum and steel. They are seeing some price increases and that’s going to really have a negative impact on that industry,” Goss says. “While the industry was doing well for June, I expect that to slow down somewhat because of these tariffs, because of these price increases and also the trade tensions as well.”

Prices remain below “break-even” for a large share of grain farmers and Goss’s survey indicates there’s been a slight “slump” in checking account deposits in rural banks. Two-thirds of the bankers he surveyed indicated their bank has increased collateral requirements on farm loans. The professor’s job index in rural areas of Iowa was in negative territory for June.

 

(story courtesy of Radio Iowa)