Ag lending

To guard against headwinds in the agricultural sector, the Federal Deposit Insurance Corp. recommended that institutions consider the “overall financial status” of farm loan borrowers.

So far farm loans are holding up well, but bankers gathered at an industry conference this week said they are growing increasingly concerned that credit quality will weaken if the U.S. and China don’t reach a deal soon.

President Trump is expected to sign legislation soon that would expand the number of farmers who could file under the more lenient Chapter 12. Ag lenders are worried because farm bankruptcies recently rose and the trade war with China could worsen.

China has few alternatives to replace its dependence on the U.S. market for soybeans, its major U.S. agricultural export, according to Moody’s.

Life insurance companies increased their mortgage investments to levels higher than historical norms, creating more potential danger for their portfolios in the event of a real estate downturn, a Fitch Ratings report said.

Farmers were already taking on more debt to cover losses from falling crop prices. New tariffs and other retaliatory moves could hurt ag borrowers further and lead to loan losses and tighter underwriting.

Stabilizing farm incomes are expected to help boost the performance of the sponsor's managed portfolio, which experienced a rise in 2015-2017 delinquencies, as well, according to ratings agency reports.

Farmer Mac has terminated President and CEO Timothy Buzby for violating company policies not related to its financial and business performance.