Will Internet Mean Credit Crunch Will Be Less Obvious Than The 1980s?

Chatted with an ag lender acquaintance recently:

Farm finances are tough in North Dakota south of Interstate 94, where most farms lost money in all of the past three years, he says. Farms north of I-94 lost money in two of the past three years, except for years with exceptional crops. Most are projecting losses in 2016.

Some will get a “bump” in financial returns for this year because they carried over grain from prior years and then sold some of it during recent rallies. They’ll start out with a bit of profit this year, but it’ll really be from last year’s receipts.

Most people in the Red River Valley may be able to make some profit on beans, while  likely none will on wheat. It’ll be close on corn.

Machinery values have fallen in the past few years but look like they might be bottoming out.

Land prices have fallen from zero to 20 percent before this year, but might go down 10 percent this year — reflecting past problems and projected returns.

Farmers have been growing their balance sheets since the 1990s but many used up their staying power in the past three years. Some may have to sell some equipment or land. Some will retire. There should be few losses for lenders.

One curiosity: Farmers today can list their machinery sales on sites that don’t require that they identify themselves. A piece can be sold for some cash flow without the neighbors knowing. Maybe, thanks to the internet, some of the pain of cost-price squeeze situations will be a more private thing than it was in the last big downturn.

What do you think?

File photo at Elgin, N.D.
File photo at Elgin, N.D.