In late 2019, when ag bankers reflected on the year and forecast expectations for 2020, they foresaw classic perennial challenges: bad weather and low commodity prices. What 2020 actually delivered would have been hard to predict.

No one has been immune from the struggles the COVID-19 pandemic has wrought on the nation’s health or the economy, including farmers and their community banking partners.

In addition to — or in some cases because of — the pandemic, among the challenges include negative profit margins from corn to cattle. For meat producers, prices dropped when the coronavirus interrupted supply chains and forced processing delays. School closures and restaurant capacity limits also impacted food producers.

Lending trends reflected the struggles, with a higher number of renewals and extensions, according to some bankers, as well as lower levels of repayment. Interest rate cuts from the Fed made refinancing higher-rate loans an option for cash-strapped farmers.

We reached out to ag bankers and asked them to reflect on 2020, to look ahead to 2021, and share their thoughts on how they see farmers adapting to times of increasing uncertainty.

What trends have you seen in 2020?

It’s been a downward trend with the prices. Most of our producers have been able to make the yields and they can’t complain about that, but it’s just the price has been so low. …We’ve had some younger farmers who didn’t have a lot of equity who have gone out of business. It wasn’t that they didn’t work hard or produce the crops, it’s just that the extra debt of the equipment from not having a lot of equity caught up with them.
– Joey Adams, Arkansas

How have the COVID-19 pandemic and the economic downturn affected farmers?

We didn’t have a lot of people … eligible for very much money on the CFAP. It wasn’t enough to really help. I think most farmers would sure like to see another [Market Facilitation Program]. … Last year if it hadn’t been for that we would have had some folks that were in serious trouble. As far as the pandemic itself, I haven’t heard of anyone who lost a good part of their crew due to it. The farmers are pretty much out in the open most of the time. We’ve got a neighbor who, if there were going to be two people in a truck, they had to wear their mask. They were doing everything they could to prevent it.
– Joey Adams, Arkansas

The economic recession that has been driven by the virus has had a large impact on both farmers and ranchers, but not maybe how many people would think. I don’t think it has had a huge impact on prices, simply because the business that local restaurants have lost with a good majority of people eating at home coupled with restrictions on the capacity they are allowed to have has been picked up by local grocery stores and chains who are showing record numbers. But I do think it has heightened consumer concern with regard to food safety and food origin, increasing the commitment from many to buy from known growers who focus on quality vs. quantity. The direct payments have been very helpful to farmers and ranchers across Oklahoma.
-Randy Waters, Oklahoma

Are five years of low commodity prices affecting agriculture?

[You are] talking about restructuring loans; we’ve done that some. We’ve extended some loans. We’ve [worked to] replenish working capital to get them back on an even keel at the beginning of the year. That’s those who had equity in their equipment or something. It is effective and pretty well what we’ve been talking about — the pessimism. And, there’s just a whole lot of stress.
– Joey Adams, Arkansas

We have seen more requests for restructures over the last couple of years as low commodity prices have stressed working capital.  As this trend continues producers will continue to erode their equity and at some point, the ability to structure an operation to provide reasonable expectation of cash flow will no longer exist.
– Randy Waters, Oklahoma

Are you seeing a rise in mental health issues on the farm?

Randy Waters

Yes. The mental health issue that I have come across… is the situation where the borrower had an off-farm job and has lost that job. These situations cause great stress on families. In most rural areas the uncertainty of schools being open has created a great deal of stress on families with children. The continued unrelenting news stories on the virus, pending elections, etc., are difficult to keep from children and have created fear with children. Parents not knowing whether their children will be in school next week or not and, if not, who will take care of them if both parents are either fully engaged on the farm or working non-farm jobs.
-Randy Waters, Oklahoma

Where is the industry headed in 2021?

It’s just getting tougher every year. I’ve had some folks that are in good shape; they’ve [told me]: “I don’t want to just hang around and lose my equity.” They’re older, [in their] 60s. And then we’ve got one crackerjack farmer this year [who] decided he’s going to quit. He’s not in financial distress or anything. He’s in his mid- to later 40s. He just said, “When that hurricane came through and I thought about all of the money I had out on crop loan and everything and possibly losing it all, it could have been worse.” It’s just a lot of pessimism, I guess.
– Joey Adams, Arkansas

Continued low commodity prices are going to continue to force both farmers and ranchers to be as careful as possible when calculating breakevens and making plans for 2021 or further out when making decisions about capital improvements and inputs. Producers and bankers alike are going to have to re-evaluate the current market values of machinery, equipment, cattle and land. Those producers who are going to rely on equity in real estate may need to take some short-term debt and convert it to long term, which will cause bankers to take a good hard look at the appreciating land equity in real estate values that may not be as high today as they were four or five years ago. These are things that we’ve seen over the years as the ag sector flows up and down.  I think 2021 will emphasize the need to be less leveraged when you’re able.
-Randy Waters, Oklahoma