Top U.S. banks are scaling down their agricultural loan portfolios, a result of significant drops in farm income and the escalating U.S.-China trade war, according to a Reuters analysis of the farm-loan holdings they reported to the Federal Deposit Insurance Corp. (FDIC).
The farm-loan portfolios of the nation's top 30 banks declined 17.5%, or $3.9 billion, to $18.3 billion between their peak in December 2015 and March 2019, the report found.
Top banks such as JPMorgan Chase had previously invested heavily in the agriculture sector between 2008 and 2015, growing its farm-loan portfolio by 76% to $1.1 billion during the period.
Reuters reports farm economists, legal experts and a review of hundreds of lawsuits filed in federal and state courts indicate shrinking cash flow is causing some farmers to retire early and others to declare bankruptcy.
The U.S. Department of Agriculture (USDA) said total U.S. farm debt is expected to rise to $426.7 billion this year, approaching levels seen in the 1980s farm crisis.
U.S. farmers have also been negatively affected by the trade war, particularly in the soybean export market.
China bought roughly half of the U.S.'s soybean exports before the start of the trade war, the USDA said, according to CNBC.
China's retaliation to the Trump administration's duties on their goods has caused the value of soybean exports to the country to fall 74% to $3.1 billion last year, from about $12.2 billion in 2017, CNBC said, using USDA data.
Chapter 12 federal court filings increased from 361 in 2014 to 498 in 2018, Reuters also reported. Such filings are a type of bankruptcy protection largely for small farmers.
Banks are aware of the struggles farmers face, David Oppedahl, a Federal Reserve Bank of Chicago senior business economist, told Reuters.
"They don't want to be the ones caught holding bad loans," he said.
JPMorgan Chase trimmed $245 million, or 22%, of its farm-loan holdings between the end of 2015 and March 31 of this year, Reuters found.
Although JPMorgan Chase did not dispute the findings, it said it has not "strategically reduced" its exposure to the farm sector, adding it has a broader definition of agricultural lending than the FDIC. That definition includes processors, food companies and other related business, the bank said.
Capital One Financial and U.S. Bancorp have also shown decreases in their farm-loan portfolios, with the former falling 33% between the end of 2015 and March 2019, and the latter dropping 25% during the same period.
BB&T's agricultural loan holdings also fell 29% since peaking in the summer of 2016 at $1.2 billion, and PNC Financial Services Group cut its farm loans by 12% since 2015, Reuters reported.