A new class of “go-go farmers” could foreshadow broader economic turmoil in the grain sector, which includes corn, soybeans and wheat.
A Reuters analysis of federal data on agricultural lending in the grain-producing states shows that delinquency rates on farmland and production loans are rising sharply.
The term “go-go” was coined by Midwest growers and agricultural economists to describe farmers who borrowed heavily to expand their farms, then borrowed more in an effort to plant their way out of a commodity price crash.
The total dollar amount of nonperforming bank farm loans shot up to $288.2 million in the second quarter of 2016, up from $132.5 million in the second quarter of 2013, the year after corn and soybean prices peaked, according to data from the Federal Deposit Insurance Corporation.
The federal government doesn’t track large farm bankruptcies, but a special category of bankruptcies for smaller farms — Chapter 12 filings — points to distress in the grain sector.
Another troubling indicator: The proportion of extremely leveraged grain and other row crop farmers in the U.S. — those with debts totaling more than 71 percent of assets — doubled, to 2.4 percent, between 2012 and 2015, according to the latest available USDA data.
Such statistics match up with the common narrative of a continued struggle against low grain prices and high debt after years of credit-fueled expansion.
Read more: St. Louis Post-Dispatch