Total U.S. agribusiness lending remained high at $ 98.6 billion in 2020 – a drop of only 1.8% year over year, according to the American Bankers Association (ABA).
According to the ABA’s annual Farm Bank Performance Report, the overall decline was mainly due to a 6.7% decrease in agricultural production loans, while government loans also removed the need for farms to seek private financial assistance.
Loans for farmland rose 2.1% for the year to $ 56.7 billion.
The ABA report, which covers the performance of the country’s 1,642 agricultural banks, found these institutions were critical to the survival of rural communities as well as small and medium-sized farms during the Covid-19 pandemic.
It is important that farm banks support rural communities through the Paycheck Protection Program (PPP). At the end of 2020, farm banks had 172,818 PPP loans valued at $ 12.7 billion on their balance sheets. The ABA said this was critical to “preserving the jobs in local small businesses and providing a vital lifeline to the communities they serve”.
Banks also provided more than $ 45.2 billion in smallholder loans ($ 500,000 or less) last year, including $ 10.5 billion in micro-farm loans (up to $ 100,000).
The report found that in 2020, farm banks “have built strong, high-quality capital reserves and are well insulated from risks related to the agricultural sector”.
Farm banks’ equity rose 9% to $ 52.6 billion, while Tier 1 capital rose $ 3.6 billion to $ 48.3 billion.
ABA Chief Economist Sayee Srinivasan said, “While the agricultural sector will continue to face challenges as the economy reopens and recovers from the coronavirus pandemic, the strong asset quality and capital levels of American farm banks will help keep it going Support for rural communities. “