The recent good times on the farm are paying off at the bank.
The University of Minnesota extension service has released its most recent numbers covering the state’s farmer-lender mediation program. The state mediation program is designed to find ways to keep a farmer in business after financial troubles lead to a default on a loan.
The extension’s report for fiscal year 2013 shows a sharp drop in the number of mediation cases from the year before — a 44 percent decline, in fact, from just over 2,900 cases in 2012 to about 1,600 in the fiscal year that ended June 30.
Record incomes some farmers earned in that period are a likely cause for the drop. A state university analysis released last spring found median net income among 2,200 farms was just under $200,000. Grain farmers did the best, with a median income of just over $250,000 in 2012.
But even with those robust income numbers, plenty of farmers — from every sector of the agricultural economy — got into financial trouble. Of the 1,600 mediation cases last fiscal year, 36 percent involved dairy operations, 34 percent were crop farmers, 15 percent came from cattle ranches, and 7 percent were hog farms.
The latest drop continues a four-year decline. In fiscal 2010 there were nearly 3,900 mediation cases, that dropped to about 3,000 the next year, then 2900 in 2012 and about 1,600 in the latest report. That’s a nearly 60 percent decline for the period.
The mediation program grew out of the financial hardships and lost farms seen in Minnesota during the ‘farm crisis’ of the 1980’s. High interest rates, plummeting land values and low crop prices conspired to drive thousands of state farmers from the land.
When the state Legislature passed the original mediation law in the 1980s, the bill’s language reflected the critical times the agricultural economy was experiencing. The statute says one of the reasons for the mediation program is “to prevent civil unrest and to preserve the general welfare and fiscal integrity of the state.”
While there’s been a sharp decline in the number of mediation cases in recent years, whether that will continue is unclear. Last year’s big harvest pushed corn prices much lower, down to unprofitable levels for many farmers. Soybean and wheat prices have also moved lower. If that trend continues, it could increase the number of loan defaults and mediation requests next year.