Glasgow, Ky | In my area the 70's/80's were a time when PCA was extremely aggressive loaning money. Equipment, hog facilities,operating money etc. were some of the major area's of expenditures. Most of the PCA money went into short term debt which really became a problem when the interest rates shot up. Couple that with lower commodity prices and the wheels fell off.
When land prices are cut in half balance sheets get ugly quick. Couple that with the equipment values falling and payments increasing drastically leading to severe cash flow problems.
Could this happen today? If interest rates hit double digits, grain prices were cut in half and land prices were cut in half what would happen? Some would weather it well just like they did back then. Others would bite the dust. We just don't know the extent of the carnage as we do not know the financial condition farmer's are in and do not know if banks would be able/willing to carry problem loans until things get better. |