Business World

Wednesday 23 October 2019

Leading Wall Street banks ditch US farms amid global trade wars

America's largest bank found enticing new opportunities in the rural Midwest - lending to US farmers who had plenty of income and collateral as prices for grain and farmland surged. Photo: PA
America's largest bank found enticing new opportunities in the rural Midwest - lending to US farmers who had plenty of income and collateral as prices for grain and farmland surged. Photo: PA

PJ Huffstutter

In the wake of the US housing meltdown of the late 2000s, JPMorgan Chase & Co hunted for new ways to expand its loan business beyond the troubled mortgage sector.

America's largest bank found enticing new opportunities in the rural Midwest - lending to US farmers who had plenty of income and collateral as prices for grain and farmland surged.

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JPMorgan grew its farm-loan portfolio by 76pc, to $1.1bn (€977bn), between 2008 and 2015, according to year-end figures, as other Wall Street players piled into the sector.

Total US farm debt is on track to rise to $427bn this year, up from an inflation-adjusted $317bn a decade earlier and approaching levels seen in the 1980s farm crisis, according to the US Department of Agriculture.

But now - after years of falling farm income and an intensifying US-China trade war - JPMorgan and other Wall Street banks are heading for the exits, according to a Reuters analysis of the farm-loan holdings they reported to the Federal Deposit Insurance Corporation (FDIC). The agricultural loan portfolios of the top 30 US banks fell by $3.9bn, to $18.3bn, between December 2015 and March 2019, it shows.

Reuters identified the largest banks by their quarterly filings of loan performance metrics with the FDIC and grouped together banks owned by the same holding company.

The banks were ranked by total assets in the first quarter of this year.

The retreat from farm lending comes as shrinking cash flow is pushing some farmers to retire early and others to bankruptcy, according to farm economists, legal experts, and a review of hundreds of filed US lawsuits. Sales of many US farm products have fallen sharply since China and Mexico last year imposed tariffs.

Reuters

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