CERRO GORDO | If there's been a subtle but disruptive trend in agricultural economics the past few years, it's been the upward creep of farm loan delinquencies twinned with low market prices for corn and soybeans.
At the end of 2015, loan delinquencies (accruing loans that are 30 days or more past due) hovered around 0.20 percent, according to the Farm Credit Administration. In 2016, that number inched up to 0.26 percent of total accruing loans. The next year the number did edge back down but only by 0.1 percent.
Farm Credit Services of America, which operates 42 retail offices within Iowa, Nebraska, South Dakota and Wyoming, hasn't released more up-to-date numbers for its area, but there is concern from insiders and agriculture businessman that things will get worse across multiple sectors.
Through the end of September 2018: Nonaccrual loans (loans 90 days past due still accruing interest) stood at 82.15 percent (compared to 81.18 percent in 2017) and total delinquencies as a percent of total loans and interest was at 0.57 percent (down by .05 percent from 2017).
In actual dollar amounts, that's $162,626 for loans 30 or more days past due. Those "not past due" or "less than 30 days past due" totaled $28,190,631.
Jeff Paullus, the general manager of agricultural dealership Brakke Implement, said things have been trending downward for six years.
"Basically we have a lot of carry over or surplus of corn and soybeans, which has kept the market price low for both corn and soybeans," Paullus said.
There's a fixed input cost for planting an acre of corn or soybeans and the current price-per-bushel profit margins make things tighter for producers.
"As far as the debt level, I think many farmers have seen working capital decreased but many have unsold crop still in the bins," Paullus said. "I don't feel debt pressure has affected our sales as much as the low commodity prices have."
The nation's farmers are struggling to pay back loans after years of low crop prices and export markets hit by President Donald Trump's tariffs, with a key government program showing the highest default rate in at least nine years.
Many agricultural loans come due around Jan. 1, in part to give producers enough time to sell crops and livestock and to give them more flexibility in timing interest payments for tax filing purposes.
"It is beginning to become a serious situation nationwide at least in the grain crops — those that produce corn, soybeans, wheat," said Allen Featherstone, head of the Department of Agricultural Economics at Kansas State University.
While the federal government shutdown delayed reporting, January figures show an overall rise in delinquencies for those producers with direct loans from the Agriculture Department's Farm Service Agency.
Nationwide, 19.4 percent of FSA direct loans were delinquent in January, compared to 16.5 percent for the same month a year ago, said David Schemm, executive director of the Farm Service Agency in Kansas. During the past nine years, the agency's January delinquency rate hit a high of 18.8 percent in 2011 and fell to a low of 16.1 percent when crop prices were significantly better in 2015.
While those FSA direct loan delinquencies are high, the agency is a lender of last resort for riskier agricultural borrowers who don't qualify for commercial loans. Its delinquency rates typically drop in subsequent months as more farmers pay off overdue notes and refinance debt.
With today's low crop prices, it takes high yields to mitigate some of the losses and even a normal harvest or a crop failure could devastate a farm's bottom line. The high delinquency rates are caused by back-to-back years of low prices, with those producers who are in more financial trouble being ones who also had low yields, Featherstone said.
The situation now is not as bad as the farm credit crisis of the 1980s — a time of high interest rates and falling land prices that was marked by widespread farm foreclosures. At the height of that crisis in 1987, U.S. farmers filed 5,788 Chapter 12 bankruptcies. There were 498 in 2018.
Some fears are also surfacing in reports such as one this month from the Federal Reserve Bank of Minneapolis, which said the outlook is pessimistic for the start of this year with respondents predicting a further decline in farm income. About 36 percent of farm lenders who responded said they had a lower rate of loan repayment from a year earlier.
Tom Giessel said he borrowed some operating money from his local bank last year and paid it off. Giessel, who raises wheat and corn on some 2,500 acres in western Kansas, said the only thing that kept the farm economy afloat in his area was that people had pretty good fall crop yields. Giessel, 66, said he had once gotten to the point where he didn't have to borrow his working capital and had a relatively new set of equipment, but he has had to borrow money for the last three years just to put in a crop.
"A lot of people are in denial about what is going on, but reality is going to set in or has set in already," Giessel said.
The February survey of rural bankers in parts of 10 Plains and Western states showed that nearly two-thirds of banks in the region raised loan collateral requirements on fears of a weakening farm income. The Rural Mainstreet survey showed nearly one-third of banks reported they rejected more farm loan applications for that reason.
Grain prices are down because farmers around the world have had above-average production for several years. But some nations' economies are not doing as well, decreasing demand for those crops, Featherstone said. Grain prices peaked in 2012 and prices have roughly fallen 36 percent since then for soybeans, 50 percent for corn and 48 percent for wheat.
When Trump imposed tariffs, China retaliated by stopping soybean purchases, closing the biggest U.S. market. While trade negotiations with China continue, many farmers fear it will take years for markets to recover — as it did when President Jimmy Carter imposed a grain embargo on the then-Soviet Union in 1980.
"The tariffs Trump is messing around with are not helpful at all — I don't think anybody knows the true effect," said Steve Morris, who farms near Hugoton in southwest Kansas.
Photos: Harvest in North Iowa
combine soybeans field
Harvesting the corn
Lone Rock neighbors help with harvest
Sun sets on growing season
Black bear in field
Black bear in field
Black bear in field
The Associated Press contributed to this report.