federal reserve
February 15, 2019

Chicago Fed Notes Dairy Liquidations, Financial Stress

 |  By: Anna-Lisa Laca

In their February edition of the AgLetter, the Federal Reserve Bank of Chicago outlined financial stress on dairy farms.


“Deteriorating agricultural credit conditions continued to affect the District in the fourth quarter of 2018,” the wrote in the report. “Repayment rates on non-real-estate farm loans decreased in the October through December period of 2018 relative to the same period of 2017, and rates of loan renewals and extensions increased.”


Lenders from Wisconsin and Michigan shared the stress their dairy clients are facing.


One Wisconsin banker said, "Dairy is the most stressed sector—financial stress and the tough January weather has many of our farmers ready to sell out."


Another Wisconsin banker reported, "There was an increase in voluntary liquidations this past year."


Milk prices and livestock prices in general were down 7% in November 2018 from a year earlier, the Fed reports. Moreover, the index of prices for livestock and associated products in November 2018 was 10% lower than a year ago.

Chicago Fed Table


Responding bankers expected non-real-estate agricultural loan volumes to increase the first quarter of 2019 relative to the same quarter of a year earlier. Surprisingly, dairy loans are forecasted to be lower in the January through March period of 2019 relative to the same period of 2018.