Wisconsin agriculture officials are concerned that farmers might be tempted by quick access loans and credit cards as many take on more debt this year.
The Wisconsin Department of Agriculture, Trade and Consumer Protection is worried that farmers may turn to predatory lending agencies after years of low crop prices, said Frank Friar, the agency’s economic development specialist. Farmers could be more likely to take out loans from unregulated lenders if they’re unable to secure one from a community bank or farm credit organizations, he said.
“When you see your neighbors planting corn and beans, when you see your neighbors cutting first crop hay and if you don’t have money to do that, any of us may grab for fast cash,” Friar told Wisconsin Public Radio. “I’m not worried about how I’m going to pay it back. I just want the money so I can be planting my crops. Because if I don’t plant a crop, I’m definitely out of farming.”
The American Farm Bureau Federation has warned that farm debt is at a record high, lending standards are tightening and the cost of credit is rising. The U.S. Department of Agriculture predicted that farm debt will increase by 4% this year, reaching nearly $427 billion. It would be the highest level of farm debt since 1982.
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Katie Wantoch, an agriculture agent with University of Wisconsin-Extension, said farmers in debt may also spend more on their credit cards, which will likely worsen their financial situation.
“With credit cards or some of these quick access loans, the interest rates are probably going to be more than the traditional banks would be able to provide,” Wantoch said. “There might be some more fees that they didn’t anticipate and that will certainly take a chunk out of their cash flow.”
Wantoch recommended that farmers communicate with their lenders about their current debt and seek a financial evaluation from a trusted agency.
Friar suggested contacting the department’s Farm Center for help evaluating an unregulated lender.