MONROE - Low milk prices for 2009 are being blamed for much of the credit crunch many Wisconsin farmers are feeling this spring.
More than half of Wisconsin banks responding to a survey by the Federal Reserve Bank of Chicago noted lower repayment rates on agricultural loans.
More than 8 percent of agricultural loans were classified as having major or severe repayment problems, compared to 4 percent overall for the district, which covers all or parts of Illinois, Indiana, Iowa, Michigan, Minnesota and Wisconsin.
Banks reported both of these numbers at under 3 percent at the end of 2008.
The survey also found about 11 percent of Wisconsin farmers with credit probably won't qualify for loans needed to plant and buy feed for livestock.
"That's because they ate all their equity up," said Dan Karlen, a dairy farmer near Monticello. "They have nothing to borrow against. If you don't have a lot of equity, banks are saying no."
Karlen said he and his wife Nancy do not carry a lot of debt. With the farm paid for, they normally do not need to borrow. But last year, they borrowed thousands of dollars to pay bills. He said low milk prices were to blame.
"I expected a significant loss last year, even before depreciation," Karlen said.
For the past couple of years, Nancy Karlen said costs have been so high that the cash they receive for their product is below the cost of production, and they still have to building upkeep and capital improvements to make.
"It's tough," Dan said. "I often ask myself, 'what am I doing this for?'"
According to University of Wisconsin-Madison agricultural economists in their 2010 "Status of Wisconsin Agriculture" report in January, total net farm income dropped by a third nationwide in 2009, but in Wisconsin it plummeted 56 percent to $1.1 billion, the lowest level since 2002.
2009 receipts for Wisconsin farm commodities were down $1.8 billion from 2008; nearly 80 percent of that decline represents a fall in milk prices. Another 15 percent was from reduced crop receipts, mainly from lower corn prices.
The Wisconsin milk price averaged around $13 for the year, down from a record $19.27 in 2008. The drop was largely from export markets drying up and leaving more milk to be absorbed by domestic markets that were already crippled by the recession, the report said.
Glenn Marass, an ag lender at the Sugar River Bank in Juda, said the status of local Green County farm loans is running along the same lines as the Federal Reserve Bank survey numbers.
"The 11 percent (farmers not qualifying for new credit) is a little high for here," he said. "Banks always do a review, but more so when things are not as flourishing," he added.
According to the Federal Reserve Bank of Chicago, one-fourth of the banks surveyed increased the amount of collateral required for loans in the fourth quarter of 2009. About 44 percent of the reporting banks had instituted tighter credit standards for 2009 agricultural loans compared to the fourth quarter of 2008.
The banks also said extensions and renewals were higher than a year earlier.
But Marass said extensions and renewals were broad terms.
"Not everybody is doing that. But some are getting extensions, if you count rolling them into other loans for assets," he said.
Interest rates are remaining low, between 5 and 6 percent, but what a farmer qualifies for depends on his credit rating- his circumstances, his reserves and the realistic value of his beef, dairy or crop production, Marass said.
More than half of Wisconsin banks responding to a survey by the Federal Reserve Bank of Chicago noted lower repayment rates on agricultural loans.
More than 8 percent of agricultural loans were classified as having major or severe repayment problems, compared to 4 percent overall for the district, which covers all or parts of Illinois, Indiana, Iowa, Michigan, Minnesota and Wisconsin.
Banks reported both of these numbers at under 3 percent at the end of 2008.
The survey also found about 11 percent of Wisconsin farmers with credit probably won't qualify for loans needed to plant and buy feed for livestock.
"That's because they ate all their equity up," said Dan Karlen, a dairy farmer near Monticello. "They have nothing to borrow against. If you don't have a lot of equity, banks are saying no."
Karlen said he and his wife Nancy do not carry a lot of debt. With the farm paid for, they normally do not need to borrow. But last year, they borrowed thousands of dollars to pay bills. He said low milk prices were to blame.
"I expected a significant loss last year, even before depreciation," Karlen said.
For the past couple of years, Nancy Karlen said costs have been so high that the cash they receive for their product is below the cost of production, and they still have to building upkeep and capital improvements to make.
"It's tough," Dan said. "I often ask myself, 'what am I doing this for?'"
According to University of Wisconsin-Madison agricultural economists in their 2010 "Status of Wisconsin Agriculture" report in January, total net farm income dropped by a third nationwide in 2009, but in Wisconsin it plummeted 56 percent to $1.1 billion, the lowest level since 2002.
2009 receipts for Wisconsin farm commodities were down $1.8 billion from 2008; nearly 80 percent of that decline represents a fall in milk prices. Another 15 percent was from reduced crop receipts, mainly from lower corn prices.
The Wisconsin milk price averaged around $13 for the year, down from a record $19.27 in 2008. The drop was largely from export markets drying up and leaving more milk to be absorbed by domestic markets that were already crippled by the recession, the report said.
Glenn Marass, an ag lender at the Sugar River Bank in Juda, said the status of local Green County farm loans is running along the same lines as the Federal Reserve Bank survey numbers.
"The 11 percent (farmers not qualifying for new credit) is a little high for here," he said. "Banks always do a review, but more so when things are not as flourishing," he added.
According to the Federal Reserve Bank of Chicago, one-fourth of the banks surveyed increased the amount of collateral required for loans in the fourth quarter of 2009. About 44 percent of the reporting banks had instituted tighter credit standards for 2009 agricultural loans compared to the fourth quarter of 2008.
The banks also said extensions and renewals were higher than a year earlier.
But Marass said extensions and renewals were broad terms.
"Not everybody is doing that. But some are getting extensions, if you count rolling them into other loans for assets," he said.
Interest rates are remaining low, between 5 and 6 percent, but what a farmer qualifies for depends on his credit rating- his circumstances, his reserves and the realistic value of his beef, dairy or crop production, Marass said.