Low crop prices, elevated input costs, and shifting trade policies are creating a tougher environment for U.S. farmers—and by extension, their lenders. As Farmer Mac’s chief economist Jackson Takach recently told ProSight, managing agricultural credit risk through today’s volatility requires more communication, more flexibility, and more attention to liquidity. Here are his recommendations:
Engage borrowers early. Forecasting is harder when tariffs, trade disputes, and fertilizer costs distort what used to be predictable cycles. “Lenders must be a bit more agile and vigilant because forecasting the next turn in the cycle has become more complex,” Takach said. That starts with proactive outreach. Many lenders are now contacting borrowers well before planting season to discuss capital needs, expected input costs, and cash-flow projections. Early conversations help identify stress points before renewal time and support timely loan decisions.
Watch for liquidity strain. Sticky input costs and weaker margins are increasing demand for operating debt. Farmers still need to buy seed and fertilizer even when prices rise. Takach noted that this puts pressure on lenders to provide short-term liquidity—and to use secondary-market tools to manage their own balance-sheet exposure. He also emphasized interest-rate risk management as a shared priority: lenders can work with borrowers to design rate-risk strategies that preserve stability when markets shift.
Expect leaner capital spending. Machinery lending demand has plunged to record lows. Faced with high equipment prices and higher rates, many producers are repairing or buying used instead of new. Lower machinery borrowing can be a sign of prudence—but also of tightening cash flow. Keeping tabs on deferred investments helps lenders gauge borrowers’ overall financial resilience.
Recognize adaptability—but stay close. Farmers are famously resourceful, whether by stretching fertilizer supplies or re-sequencing crop plans. Yet, Takach warned, some costs—especially fertilizer and feed—are unavoidable. That makes consistent lender engagement essential. “Maintaining open communication among farmers, lenders, and the entire capital chain is important,” he said.
For agricultural lenders, the near-term playbook is straightforward: stay proactive, track liquidity early, and help customers manage rate and cost risks before they compound. In a volatile season for farming, steady communication may be a lender’s most valuable asset.
