ABA Survey: Ag Borrower Profitability Increased in 2021

Photo of Nate Franzen speaking at ABA's Agricultural Bankers ConferenceA majority of ag lenders—69.7%—reported that overall farm profitability increased in the prior year, due in large part to government support, which is estimated to account for 38% of ag borrowers’ net income, according to the 2021 Agricultural Lenders Survey conducted by ABA and Farmer Mac. This marks the first time since the survey began in 2016 that a majority of ag lenders reported an increase in overall farm profitability. Lenders also said they expect that 80% of their borrowers will be profitable in 2021.

Competition with other lenders was the greatest overall concern facing ag lenders in 2021, with just more than half ranking it among their top two concerns, up 13 points from last year. The majority—82.3%—said the Farm Credit System was their number one competitor. Other top concerns included weak loan demand, interest rate volatility and credit quality and ag loan deterioration.

For the first time in more than five years, lenders reported a pullback in demand for ag production loans, though they expect demand to recover over the next 12 months. One factor that drove down demand for financing was borrowers’ reliance on government payments in 2021. Seventy percent of ag lenders report increased reliance on government payments over the past 12 months—moderately less than 87% last year. The survey also found that ag lenders played a significant role in the Paycheck Protection Program, making more than 600,000 PPP loans in 2021 worth more than $16.4 billion.

The survey was released on Tuesday during ABA’s Agricultural Bankers Conference in Cincinnati. During the conference on Monday, ABA President and CEO Rob Nichols and ABA Chair Scott Anderson discussed conditions in the ag sector and how ag banks fared during the pandemic with SDBA Board of Director Nate Franzen, president of ag banking at First Dakota National Bank in Yankton, S.D., and Shan Hanes, president and CEO of Heartland Tri-State Bank in Elkhart, Kan. Read the survey.

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