New report indicates drop in number of profitable U.S. farms

Only 58 percent of farms will remain profitable in 2024, the 2023 Ag Lending Survey report says

A new report indicates fewer U.S. farms are profitable compared to years past.

Only 58 percent of farms will remain profitable in 2024, compared to 78 percent last year, the 2023 Ag Lending Survey Report says.

The report, conducted by the American Bankers Association and the Federal Agricultural Mortgage Corporation (Farmer Mac), included responses from more than 450 ag lenders with assets ranging from under $50 million to more than $1 billion.

A majority of the respondents were ag loan officers responsible for generating loans and managing relationships.

Whether a farm remains profitable in 2024 is partly dependent on what it produces and how markets fluctuate.

Crop and livestock producers are in different positions, the report says.

“Annual crop growers are projected to see significant drops in farm profitability due to lower commodity prices,” the report reads. “Meanwhile, some livestock producers are expected to benefit from stable to higher animal protein commodity prices and sharply lower feed costs.”

Lenders identified two overall concerns.

One is credit quality and the ability for farm customers to make regular payments.

Another is agricultural loan deterioration, a material deterioration in the creditworthiness of a customer.

“As a result, a higher share of lenders plan to tighten underwriting standards and loan terms for agricultural credit,” ABA and Farmer Mac’s report says.

The report adds that two of five respondents plan to tighten the criteria over the next 12 months, and more than half plan to do the same for ag production loans.

Despite tighter credit standards, however, lenders expect to approve 88 percent of borrowers’ renewal requests.