Don’t blame Santa!
Everyone, including your local ag producer, is getting “less for more” this holiday season. Rising inflation hasn’t only affected the price or quantity of gifts sitting under the tree this year, it has also had a major effect on input costs for our local farmers and ranchers.
Many of our major ag lending credit unions are also concerned with rising costs and are stepping up to the plate to assist members by increasing operating lines of credit to help their borrowers cope with these swelling expenses that have the potential to squeeze margins as producers continue to battle through pandemic related supply chain issues into 2022. Unfortunately, it’s not always that easy for all lenders and ag borrowers. Typically, we focus mainly on yields and commodity prices to determine how the ag industry is preforming, but that focus has shifted, forcing producers to juggle both sides of their income statement.
There is some good news – we are not in this alone. Last week, Senator John Thune (R-SD) authored a letter to all the prudential regulators, including the National Credit Union Administration (NCUA), urging them to monitor the impacts of inflation on the agriculture economy and to ensure lenders have the flexibility needed to help borrowers through this period of heightened inflation.
The letter specifically points out, “Specific to agriculture, inflation is hiking the cost of doing business on everything from fertilizer to fuel to machinery, among a number of other things needed to keep farm and ranch operations running. To name just a few examples, fertilizer prices have increased by 265 percent since May 2020, and farm diesel prices and used farm machinery prices are up year-over-year by over 50 percent and 34 percent respectively. And these rising input costs are one of the factors contributing to declining optimism among farmers.”
Overall, the letter can be summarized with its concluding statement, “Therefore, as producers potentially seek greater amounts of credit, we urge you to not increase regulatory or examination burdens upon community financial institutions, which could interfere with their ability to extend credit to agriculture customers. We believe that community financial institutions have the necessary capital to help their farm and ranch borrowers keep up with rising input costs as profit margins tighten, while maintaining the proper safety and soundness considerations.”
We appreciate Senator Thune’s leadership and willingness to stand up in support of our Dakota producers and credit unions alike. But, this is only the beginning, as we believe this will continue to be a major area of concern throughout 2022.
The good news is that we are all in this together! Lets all take these next two week to focus on the positives as we kick off 2022 and leave 2021 in the past. I wish you all a Merry Christmas, Happy Holidays, and Happy New Year!
As always, feel free to contact me with any advocacy questions or concerns.
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