Financial stress is mounting in the Farm Belt, pushing more growers to take on high-interest loans outside traditional banks to stay in business, the Wall Street Journal reported. After his local farm bank wouldn’t lend him as much as he said he needed in 2017, Iowa farmer James Kron turned to Ag Resource Management LLC, a Texas-based financial-services firm. Now, when he takes his corn and soybeans to grain elevators near his farm, he signs the checks over to ARM until his loan is paid back in full. He is one of many farmers leaning on alternative lenders to make it through the steepest agricultural downturn in a generation. With crop prices stuck at low levels, traditional farm banks are placing stricter terms on farm loans and doling out less money, leaving cash-strapped farmers such as Mr. Kron to seek capital from more lightly regulated entities. While firms including ARM, FarmOp Capital LLC and Fora Financial LLC can be a lifeline for farmers, their loans can carry interest rates double those of traditional farm banks, said farmers, agricultural economists and lenders. The funding can require closer monitoring of how farmers spend as well as liens on each bushel of grain they produce. “They keep their finger on you,” said Kron, who has borrowed from ARM over the past three years at interest rates of about 8 percent. Comparable rates at more-traditional banks are between 2 percent and 5 percent. Five straight years of bumper harvests have pushed down crop prices and eroded farm profits. The Trump administration’s trade war with China has further depressed demand for U.S. crops. Record wet weather this year left millions of acres unplanted. (Subscription required.)
Public Law 116-51 , the Family Farmer Relief Act, raised the eligibility limit for Chapter 12 up to $10 million from about $4 million, and is now in effect.
