Agricultural lenders warn that $140 billion in emergency farm aid since 2018 may be masking financial risks as producers face rising costs.

Federal farm payments totaling $140 billion since 2018 are raising concerns among agricultural lenders about farmers' ability to repay debt without government support. The issue dominated discussions at the American Bankers Association Agricultural Bankers Conference in Minneapolis this week, as economists and bankers examined the financial outlook for 2027. With grain prices under pressure and production expenses climbing, lenders are questioning how much of the income reported by producers comes from farming and how much depends on federal assistance.

Government payments have covered losses linked to trade disputes, the pandemic, low commodity prices and rising fuel expenses. In 2026 alone, farmers received $12 billion through Farmer Bridge Assistance, followed by the announcement of another $8 billion under the Harvest Fuel Relief Program. The money has helped producers meet operating expenses and keep loans current, but bankers are concerned about what happens when those payments are reduced, delayed or discontinued.

The latest agricultural lender survey from the American Bankers Association shows how significant federal assistance has become. About half of surveyed lenders said government payments account for at least 25% of their borrowers' net income, compared with 30% a year earlier. Another 28% reported borrowers whose government payments represented as much as 49% of income. More than two-thirds of respondents expect dependence on federal support to increase in 2027, when fertilizer, fuel and other input costs could further reduce grain producers' margins.

Farm Credit Faces a Tougher Test as 2027 Costs Rise

Purdue University agricultural economist Trey Malone urged banks to review their largest operating loans without including emergency payments in projected income. He recommended examining the 25 biggest credit lines to determine whether those borrowers could cover their obligations using farm-generated revenue alone. Malone also warned that future assistance could arrive under different rules or payment schedules, creating problems for producers who depend on federal funds to cover seasonal expenses.

Bankers are already seeing signs of pressure ahead of the next planting season. Jeff Meeker, chief lending officer at LCNB National Bank in Ohio, pointed to higher fertilizer and fuel costs alongside weaker grain prices. The combination could make 2027 one of the most expensive production years for some growers. Nearly 80% of agricultural lenders surveyed said they do not count unapproved government payments when evaluating loan applications, reflecting concerns about relying on income that has not been authorized.

Changes in Washington could further complicate financial planning. David Kohl, professor emeritus at Virginia Tech, said adjustments to federal farm payments and subsidies may follow the November elections, although he does not expect immediate changes. The uncertainty comes as producers and lenders weigh the role of emergency assistance alongside established farm bill programs and crop insurance. Unlike regular support mechanisms, ad hoc payments are not guaranteed from one year to the next, making them difficult to include in long-term financial projections.

Farmland purchases are another concern. High land values can strengthen a farmer's balance sheet and provide collateral, but they do not necessarily translate into money available for loan payments. Malone cautioned lenders against treating land equity as proof of repayment capacity. For growers considering expansion, the ability to cover debt through crop sales rather than government checks is becoming a more important part of financing discussions.

For now, banks are preparing 2027 loan reviews with two sets of numbers: farm income with government assistance and farm income without it. The difference could determine whether producers qualify for additional operating credit, refinance existing debt or postpone land purchases. With planting expenses approaching and no certainty over another round of emergency payments, those calculations are becoming harder to ignore.

Source - https://www.agrolatam.com