Agricultural lender CoBank hurt by tough farming economy

Fewer agricultural loans have hurt an ag lender's earnings.
Fewer agricultural loans have hurt an ag lender's earnings.
CoBank, a leading cooperative bank serving agribusinesses and rural utilities throughout the United States, reported second-quarter net earnings were down 1 percent due to lower loan volumes and struggling farmers.

Demand for loans for purchases of tractors and other farm equipment and land has fallen off this year amid lower farm profits.

In the face of difficult economic, credit and financial markets, the fact of the bank's rise in year-to-date earnings reflect CoBank's strength, said Robert B. Engel, president and CEO of CoBank.

Agribusiness lending has declined markedly this year due to the drop in prices for grains and farm inputs from 2008's extremely high levels, Engel said.

A decline in the credit-worthiness of the bank's loans was attributable to stresses in a number of the industries CoBank serves, particularly dairy, livestock and ethanol.

Brian P. Jackson, CoBank's CFO, said CoBank expects further moderate declines in credit quality due to impacts from the global recession on its customer base.

Last month, the American Bankers Associated said community banks that provide service loans for farmers and ranchers have expanded lending since the recession began, but future capital constraints could reverse that trend.