With spring planting only weeks away, Wisconsin farmers are getting a tough time getting loans which are as important to their livelihood as crops, livestock and plain difficult labor.
That’s partly simply because more than 8% of agricultural loans in the state were classified as getting “major or severe” repayment problems, according to a survey of banks by the Federal Reserve Bank of Chicago.
About 11% of Wisconsin farmers with current credit rating most likely would not be able to get new credit rating lines this year, the worst level within the Upper Midwest, according to the survey.
As farmers gear up to buy seed, fertilizer as well as other supplies for planting, many will not qualify for that credit rating they have to put crops in the ground and to purchase feed for their livestock.
The difficulties stem partly from depressed dairy farm incomes, the state’s single-largest source of cash farm receipts.
While net farm earnings dropped by a third nationwide in 2009, in Wisconsin it fell 56% to $1.1 billion – the lowest level since 2002, according to University of Wisconsin-Madison estimates.
It is tough for farmers to obtain a loan now, particularly if they don’t have equity in their business and have fallen behind on their bills.
“Dairy includes a tougher row to hoe than other parts of farming,” said David Oppedahl, a Federal Reserve economist.
“It has been under probably the most financial tension of any main sector of agriculture within the final couple of years,” he added.
The farm loan repayment problem is roughly twice as poor in Wisconsin as in Iowa as well as other states not as dependent about the dairy market, in accordance to the Federal Reserve.
Spending down old debt
Some farmers barely created a dent in paying down their spring planting loans from last year.
Bruce Drinkman, a dairy farmer from Glenwood City, mentioned he cashed out his wife’s retirement account so that you can maintain farming.
But now his farm is in foreclosure, and he has no hope of getting a bank loan for spring planting.
“We will be lucky if we can keep the farm,” Drinkman mentioned.
Some farmers cashed out their equity and savings just to purchase cattle feed and spend utility bills. Emergency federal government assistance eased some of their losses in 2009, but it was not enough to make them lucrative.
Farmers charged tens of thousands of bucks on their credit cards just to keep their operations heading. And lenders are searching significantly deeper at farmers’ business practices prior to producing loans.
“I have heard that great deals of individuals aren’t getting operating loans,” said Tim Strobel, a dairy farmer from Watertown.
“We are attempting to work within our means and do not need to borrow money month-to-month like we did last year. But we aren’t moving forward too quick, either, given the downturn in milk prices,” Strobel said.
Farmers are risk takers. They borrow cash to plant crops and hope the fall harvest will be great enough to spend off the loan. Milk prices sometimes plunge, leaving dairy farmers a large number of bucks short on their monthly bills.
“If you cannot get crops planted, it is the first sign that a farm will close,” mentioned Danny Strupp, owner of Strupp Implements Co. in Slinger.
There are more postings than usual for farm auctions, a troublesome sign in the rural economic climate.
“In 2010, we are heading to see a lot a lot more farms go out of company,” mentioned Darla Sikora, executive vice president at Citizens State Bank of Loyal, Wis.
The fallout of 18 months of low milk prices is taking its toll, she said. “It has had some devastating effects.”
A credit rating crunch
More compact farms have been hard hit by the credit crunch, in part simply because some operators have lost their off-farm jobs that covered loan payments.
The overall economic climate, and a lot more restrictions on lending practices, has created things worse.
“Earlier, we knew that bigger dairy farms had been financially distressed but the more compact farms were hanging in there. We attributed that towards the truth that little farms had lower debt loads and off-farm incomes,” mentioned Amber Bennett, a senior vice president with Badgerland Financial, a farm lender.
Federal government loan programs have helped some farmers get through the latest rough patch. But within the dairy industry, at least, what’s required is an increase within the farm milk cost.
“It is absolutely the root from the issue,” said Katherine Ozer, spokeswoman for the National Family Farm Coalition, based in Washington, D.C.
Drinkman said he hopes to maintain farming even with his farm – Desperation Acres – in foreclosure.
“We happen to be fighting it tooth and nail,” he mentioned. “And I will be able to plant this spring simply because my word is nevertheless good at my suppliers. When you earn respect in a community, it doesn’t disappear overnight.”
8%
Farm loans getting repayment difficulties
11%
Farmers who may not get new lines
56%
Decline in net farm earnings final year
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