Farm defaults low despite drought

10/28/2011 12:00 AM

08/08/2014 10:06 AM

Farm loan delinquencies remain low in Kansas as fall harvest wraps up, but it is too early to know what impact the drought will have on loan repayments, a top Farm Service Agency loan official said Thursday.

The agency, part of the U.S. Department of Agriculture, is the state's biggest single lender for farmers. Loan chief Arlyn Stiebe said the agency had a delinquency rate of 2.7 percent on its farm operating loans as of the Sept. 30 fiscal year end.

The rate has been lower this time of year only once in the past 13 years — in 2008, when the delinquency rate was 2.4 percent, Stiebe said.

"Typically this time of year is when delinquencies are at their lowest," Stiebe said.

Most loan payments come due between December and February, after the fall harvest is in.

But despite the drought in Kansas, agency officials in the field aren't hearing about a lot of problems that may cause farmers to default on those loans, he said.

"The drought is severe. It has caused a lot of crop damage and all, and there have been lots of losses, but the saving grace has been one of the forms of multi-peril crop insurance," Stiebe said. "That is helping out tremendously."

Bill Spiegel, spokesman for industry trade group Kansas Wheat, said farm delinquencies do not seem to be an issue among the membership this year despite the drought.

"It would appear to be a challenge this year, but I do think we have a good safety net," Spiegel said. "I also do think farmers are doing a pretty good job of trying to plan for challenges such as this. They are pretty conservative for the most part."

The Farm Service Agency lent Kansas farmers about $131.2 million during the past year. That is down from the record $162.5 million loaned out the previous year, when the agency got a big supplemental appropriation from Congress.

The previous high was set in 1985, at $153.7 million.

Although the agency did not have as much money to lend in Kansas this past year, it was enough to cover farmers' needs, Stiebe said.

Stiebe said he is not picking up a "sense of panic" or push to refinance from strapped borrowers as the due date nears for most operating loans.

"It is quite different than what most people were thinking or expecting," he said. "It is not to say there aren't some people out there who haven't had some serious problems and aren't in trouble.

"But, as a whole, it is not as big a problem as it could be with all things considered. I am pretty happy about where we are at."

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