Banks lower expectations as drought worsens

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by Katie Gauthier

Story Created: Aug 16, 2012 at 5:51 PM CDT

Story Updated: Aug 16, 2012 at 6:36 PM CDT

Over 22 percent of Nebraska is now in extreme drought. This has bankers lowering their expectations.

The latest survey of the Agricultural Credit Conditions says intensifying drought conditions are cutting banker's expectations for farm income.

"If you don't have income and you've got all these expenses, you're not going to be able to repay maybe your land or have as much money to buy on that next pickup or next car or next tractor," said Five Points Bank President Terry Anstine.

So what's the biggest impact on local banks?

"This year operating expenses are a little higher than expected so we're now seeing farmers coming back in and running out of their checking account balance and needing to borrow a little bit," said Anstine.

That's typically a good thing for banks. But, only if they're going to get their money back.

A year ago it was a different story.

"Last year, I think we had pretty good yields, prices were pretty good. This year, right now, I think, prices have exploded. I mean, we've got cash corn prices upwards of $7.50 to nearly $8," Anstine said.

According to the survey bankers reported that livestock producers are being hit the hardest.

"I think Nebraska's probably got more cattle than obviously Iowa, Indiana, Illinois so I think the livestock part of it, Nebraska's going to take a bigger hit than the eastern corn belt," said Anstine.

The drought doesn't just affect bankers, it affects other businesses across the nation that you may not even think of like a car dealership.

"It sounds like food prices are going to go up ya know because of the drought and so naturally that's going to affect consumers and they're going to have less money to spend ya know on cars and trucks and different things," said Paul Spady General Manager Greg Ellenwood.

"Overall we win if ag wins. I mean I think all of south central Nebraska wins if ag wins," said Anstine.

The drought in Nebraska is forecasted to persist or even get worse.

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