Over past two decades, farmers have had to increase some loans and stretch them over longer amounts of time - Entrepreneur Generations

Though farm income has increased a bit since 2018, farmers are still struggling with ever higher levels of debt, and they're having to stretch payments over a longer amount of time to manage monthly payments, David Widmar reports for Agricultural Economic Insights.

Farm debt is now approaching levels last seen in the 1980s, and has been rising steadily since 2015, Widmar reports. Repayment terms on all non-real estate farm loans have increased from around 11 months in 2000 to almost 16 months in 2018, with a big dip in the middle during the recession, according to the Kansas City Federal Reserve Bank.

The repayment terms for farm machinery and equipment loans have increased too. In the early 2000s, loan terms were generally about 25 months, but in 2018 were nearly 35 months—an increase of about 45%, Widmer reports.

Repayment terms on loans for "other" livestock (i.e., not feeders) have increased over the past two decades as well. In 2000, the average loan term was around 11 months; in 2018 it was almost 19 months, a 60% increase, Widmer reports.

"On the one hand, longer repayment terms – coupled with historically low-interest rates- makes it easier for producers to meet the annual debt service obligations of historically high debt levels. Longer terms and low rates are certainly preferred to a scenario of 1) short repayment terms and 2) high-interest rates," Widmer reports. "On the other hand, the extended debt terms leave producers “on the hook” for a longer period of time. For machinery and livestock, terms in 2018 were 10-12 months longer compared to 2000-2010. While the annual obligation is lower, the number of year obligated have increased."

from The Rural Blog https://ift.tt/31EvwY2 Over past two decades, farmers have had to increase some loans and stretch them over longer amounts of time - Entrepreneur Generations

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