ABA Banking Journal - November 2013 - (Page 15)

community banking Ag Banking Will farmland prices hold up? If there are rough spots ahead, what can ag bankers do about it? KSU professor has ideas BY STEVE COCHEO, EXECUTIVE EDITOR & DIGITAL CONTENT MANAGER pHOTOS: SHUTTERSTOCK.COM T he farm financial crisis of the 1980s was ugly. Few people in farm country passed through that period without learning some painful lessons. One banker summed up the experience as "living in a world of hurt." Bankers, questioned about the sharp rise in farmland prices over the past couple of years, stress the conservatism burned into the minds of both producers and lenders who had been through the crisis. They also note that price trends are spotty and that many recent land purchases have been for cash. Nevertheless, questions persist about the potential for another ag land bust. Is there a price bubble? If so, what would cause it to burst? And if that happened, what can banks do? Plowing deep into the numbers Dr. Allen Featherstone, professor of agricultural economics at Kansas State University, Manhattan, Kans., and a scheduled speaker at ABA's N at i o n a l A g r i c u l t u r a l B a n k e r s Conference this month, has been studying the possibilities. In a recent paper, Leveraging the Farm, and in answers to questions from ABA BJ, Featherstone makes a case for caution, but also for cautious action. Featherstone has studied various databases, one of them the historical performance of the loan portfolio of Equitable Agribusiness during the 1980s. He found this telling point: "Even in the worst time to be lending in the last bust, only about 10% of the loans made during that period did not make it. . . . But that 10% caused havoc in the system." In his research, Feather stone november 2013 | ABA BANKING JOURNAL | 15 http://www.SHUTTERSTOCK.COM

Table of Contents for the Digital Edition of ABA Banking Journal - November 2013

Chairman's View
Editor's Column
The Economy
Picture This
Bank Notes
Will farmland prices hold up?
Tech Topics
What you do, amplified
Inside Farmer Mac
Meeting the challenge of identity theft
Compliance Clinic
Compliance Inbox
Pass the Aspirin
ABA At Your Service
First Person

ABA Banking Journal - November 2013

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