Economic fallout from the coronavirus outbreak hasn’t yet severely hindered farmers from getting or repaying loans from a major network of agricultural lenders.

While the Farm Credit System’s financial results for the first half of 2020 reflect continued stability in agriculture, experts say the pandemic’s effects on agricultural debt may still be felt in the future.

“Nobody really knows what the impact is going to be. It’s still a volatile environment,” said Hal Johnson, senior financial analyst with the Farm Credit Administration, which regulates system lenders.

“Certainly, we expect credit stress to increase in the portfolio,” he said. “It’s just very difficult to understand to what extent that’s going to happen.”

The Farm Credit System, which consists of 72 lending institutions, was created by Congress more than a century ago to provide loans to farmers and agricultural businesses across the U.S.

The network’s total loan volume has grown 3.5% to $297 billion during the first half of 2020, according to the Federal Farm Credit Banks Funding Corp., which raises money for system lenders.

In that time, Farm Credit System lenders have earned a combined net income of nearly $2.9 billion, up about 7.7% from the same point last year, according to FFCB.

The increase in loan volume is “normal” and driven primarily by real estate mortgages, which have continued growing during the pandemic, said Johnson.

Farmland values have largely held firm so farmers have kept buying properties, especially since interest rates are attractive, he said. “This is an opportunity to lock in low rates for a long period of time.”

Despite the disruption caused by the coronavirus outbreak, farmers still face beneficial “economies of scale” to spread their fixed costs over a larger number of acres, Johnson said.

Anecdotally, the desirability of agricultural real estate may also be spurred by the isolation of such properties, said Todd Van Hoose, president and CEO of the Farm Credit Council, a trade association of system lenders.

“There continues to be a lot of people escaping from cities and buying farmland,” he said.

Meanwhile, growers have been financially buoyed by assistance from the federal government, such as the USDA’s $19 billion Coronavirus Food Assistance Program, which provides direct support to farmers and ranchers while buying food that’s distributed to the needy.

“Even though crop prices are low, there is a flow to what someone can earn from planting,” Johnson said.

Interest rates on the loans made to growers have dropped but Farm Credit lenders have nonetheless benefited as their own interest expenses have declined more steeply, he said.

For that reason, the network’s net income has increased even as lenders have set aside more than twice as much money for potential loan losses — $158 million during the first half of 2020, compared to $66 million during the same point last year, according to FFCB.

Meanwhile, the Farm Credit System’s non-performing assets, such as loans that are past due on principal or interest payments, have grown from roughly $2.35 billion to $2.5 billion during 2020.

Though that’s an increase of about 6%, loan volume has also grown, so the proportion of non-performing loans to total assets rose only slightly, according to FFCB.

“It’s difficult to say whether that’s an indicator related to the issues with COVID-19,” Johnson said.

Northwest Farm Credit Services — which serves farmers in Oregon, Washington, Idaho, Montana and Alaska — has actually seen its non-performing assets drop from $79 million to $77.7 million while loan volume has remained basically unchanged in 2020.

This decline was “somewhat surprising” given the dire effects that coronavirus has had on the broader economy, said Tom Nakano, the institutions executive vice president and chief administrative and financial officer.

“We were expecting things to be rougher than they were,” Nakano said.

Farmers, ranchers and foresters in the region “were in pretty good shape heading into the crisis” and seem to have weathered it better than many other businesses, he said.

However, consumer debt is typically faster to show adverse effects from an economic downturn than agricultural companies, Nakano said.

“It really doesn’t show up in those non-performing numbers that quickly,” he said. “It may take a couple of quarters to show up.”

Due to the strong financial support from the federal government, 2020 is expected to “come out OK for farmers” but it’s unknown whether such assistance will continue, said Van Hoose of the Farm Credit Council.

“Our folks are probably more worried about 2021,” he said. “The ability to project a profit is tough and it’s weighing on a lot of farmers.”