The Farm Credit Picture

Lloyd Cline


 
ABSTRACT

My assignment is to review the current financial state of the farming economy. I am sorry to say, it is not good. There can be no doubt now that agriculture is approaching a crisis where credit is concerned. You have all heard the horror stories. Let me repeat some of them.

Total U.S. farm debt now stands at roughly $211 billion -- greater than the national debts of Mexico and Argentina combined. About $74 billion of that is owed to the Federal Land Banks and Production Credit Associations of the Farm Credit System, which will record a loss in 1985, for the first time in history.

Farm Credit Administration Governor Donald Wilkinson has said a federal bail-out will almost certainly be required within two years, with estimates that up to 15 percent of their $74 billion loan portfolio might be uncollectible.

A special credit review of the Federal Land Banks (FLB's) completed recently by the system shows that approximately $6 billion of the FLB's $50 billion in loans outstanding are "under-collateralized." In other words, the loan amounts exceed 100 percent of the market value of the land that provides collateral for the loan. The amount by which the loan exceeded the land value was estimated at about $930 million -- $155 per acre on six million acres.,



Reprinted from Proceedings of the 1986 Beltwide Cotton Production Conference pp. 49 - 50
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998