The country is facing economic crisis, but experts say farms won't have trouble securing loans, according to a story published today in the California Farm Bureau's AgAlert newspaper.
"Unlike financial institutions that have been devastated by subprime mortgages, the agricultural lending sector has remained on solid financial footing because of its strict lending practices," reporter Ching Lee wrote.
For the story, Lee spoke to UC Davis agricultural economist Steven Blank. He said the tighter lending standards for farmers have their roots in the agricultural recession of the 1980s. Inflation in the '70s had pushed farmland values so high that many producers borrowed against their equity to buy more acreage to expand their operations. When farmland values dropped as much as 60 percent in a couple of years, many growers had gone so far into debt that their farm incomes were no longer sufficient to meet their loan payments.
"It was just like the foreclosure problems we have now, except it was in farms," Blank was quoted.
The resulting lending practices -- requiring farmers to answer questions about their assets, production costs and crop plans, provide the financial details of their operations and show proof that they can pay off their debts -- have insulated the farm credit market from the Wall Street woes that have tightened the nation's credit market, the story said.
Blank told the reporter that, despite the gloomy overall economic forecast, he is optimistic that, in a couple of years, "we'll be right back to normal."
"Being in agriculture is a great place to be in down times because people are going to eat," Blank was quoted. "Even if the economy is a little soft, we're all going to keep getting hungry. I think agriculture in many ways is a bit more of a safe harbor than other parts of the economy in that regard."