It’s Not Business as Usual
April 2, 2020
In March, the Rural Mainstreet Index plummeted to 35.5, which was the largest one-month drop since the survey started in 2006. ( Photo: Lindsey Pound )
2020 held such promise. “People are optimistic about the future of agriculture and economic conditions on their farming operation.”
That’s how Jim Mintert, director of the Purdue Center for Commercial Agriculture, described the January and February results of the Purdue University/CME Group Ag Economy Barometer, a measure of the ag economy health. Sentiments were at an all-time high.
“A lot of that was probably tied to President Donald Trump signing the phase-one trade agreement with China and the USMCA,” Mintert says.
Pandemic Dwarfs Phase One
That good demand news was rapidly overshadowed by COVID-19.
“Around 60% of bank CEOs expect the coronavirus to produce a recession in their market area,” says Ernie Goss, Creighton University economist and lead for the Rural Mainstreet Index, a monthly survey of rural bank CEOs in a 10-state Midwest region.
Many farmers’ balance sheets looked OK at the beginning of 2020, says Bill Johnson, president and CEO of Farm Credit Mid-America.
“We spent a lot of time last summer talking about how to work through these current economic challenges,” he says.
However, since writing those business plans, the COVID-19 outbreak has all but frozen the global economy. The Federal Reserve slashed its key interest rate to near zero, which at least provided an opportunity for farmers.
“The entire balance sheet on the liability side should be looked at from a rebalancing perspective,” says Alan Hoskins, president of American Farm Mortgage. “Take inventory of current interest rates.”
The Farm Credit Administration is encouraging its lenders to work with borrowers and operations affected by COVID-19. Recommendations include extending the terms of loan repayments, restructuring borrowers’ debt obligations or easing some loan documentation.
Regardless of what else happens in 2020, figuring out what’s “normal” might be the biggest challenge.