FARGO - North Dakota bankers, who gathered here recently for a conference on agricultural lending, included a seminar on how to recognize distressed farm borrowers and how to mitigate their stress.
The recent session for the conference of the North Dakota Bankers Association is a sign of the times as farmers carry out harvest for yet another crop year dominated by low prices, compounded by high input costs and the uncertainty caused by trade disputes.
Good yields could be the salvation for many farmers around the state - especially for those who aren't burdened by high debt levels, bankers said.
"It varies by location," said Rick Clayburgh, president of the North Dakota Bankers Association, who added that, according to reports, the wheat harvest was good or at least fair throughout most of the state.
"Overall the small grains were good," Clayburgh said. "Corn looks like it might be good."
Pockets of the state, however, are seeing lower yields because of drought, including an area around Bottineau, he said.
Brad Sessler, president of the Casselton branch of BankNorth, said good yields have softened the blow of low prices for farmers in his area.
"The yields are what have saved us," he said. But farmers who grow soybeans, whose once projected $8.50 per bushel, have to make do with less than $7 per bushel, Sessler said. "It takes a lot of yield to make up for that price reduction."
The low prices hit farmers who are carrying high debt loads the hardest, he said. "This is going to be a very tough year for them," he said. "At current prices, the capacity to cover any additional debt is not there."
Dan Vollmer, regional president of Dacotah Bank in Minot, said farmers with high debt will have "extreme difficulty" cash flowing because of the low commodity prices. Commodity prices likely will remain low for the next 24 months, he said.
"By and large, the vast majority of our producers are going to be OK, I think," Vollmer said.
Expected bumper crops for corn and soybeans around the U.S. are suppressing prices. That's especially challenging for soybean growers, who are struggling with a loss of a major export market in China as a result of trade tariffs.
In recent years, given chronically low farm commodity prices, bankers have stepped up their reviews of farmers' loan applications.
"A couple of banks will be looking at their loan loss reserve and enhancing it," Clayburgh said.
The prolonged period of low commodity prices has significantly eroded farmers' working capital, needed to finance their operations, and in some cases has depleted it, bankers said.
In southwest North Dakota, farmers harvested a pretty good small grains crop, but the two previous year were drought-stricken, taking their toll financially, said Diane Pierce, a vice president and loan officer at Dakota Western Bank in Scranton.
"I think we're going to rebound some," she said. Still, she added, "There wasn't a lot of working capital for our farmers." Many farmers were forced to restructure their debt, often stretching out their payments, to get through tough times.
In fact, a survey of North Dakota bankers found that more than 31 percent estimated that 51 percent to 75 percent of their borrowers lost working capital last year, closely followed by 30 percent who estimated 26 percent to 50 percent lost working capital.
Most bankers believe most of their ag borrowers still have the capacity to restructure their debt: 44 percent estimated 51 percent to 75 percent could restructure, while 43 percent estimated 76 percent or more.
Bankers work with their customers to help them preserve their equity, Pierce said
Bankers feel the strain when their ag borrowers are hurting, she said.
"It's stressful for us," she said. "It's stressful to be a banker in tough times."