In a recent credit symposium, Federal Deposit Insurance Corporation Chair Sheila Blair discussed potential credit problems that could face the agricultural sector in the near future. In the last ten years, farmland values have risen sharply. Spurred by high crop-prices and low interest rates for farmland, agricultural investment is an attractive, and relatively safe, investment. This increase in value could potentially lead to an economic crisis, Blair stated on Thursday, “While we don’t see a credit problem in agriculture at this time, the steep rise in farmland prices we have seen in recent years creates the potential for an agricultural credit problem sometime down the road.”
While the agricultural market is currently experiencing a boom, Blair, and others, have urged restraint, pointing out that agricultural production is inherently volatile. Changing weather patterns, increasing fuel costs, the fluctuating value of the dollar, and increased costs of fertilizers, could all dramatically shift agricultural markets and change domestic production. Falling crop prices and increased production costs could all make it difficult for farmers to service outstanding debt.
Blair urged an increased attention to risk management as a way to prevent an economic crisis in agriculture. Citing the 2008 real estate crisis, Blair urged the FDIC to continue to monitor risks in the agricultural market as a way to both protect farmers and agricultural investors, but also to protect banks and the investment market as a whole.
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Written by: Justin Ellison / Farm Plus Staff Writer