Source:  POLITICO'S MORNING AGRICULTURE, 6/25/19

Trump's trade war is pushing the rural economy closer to a full-blown meltdown, as economic challenges in agriculture start to weigh more on banks that lend to farmers and ranchers, Pro Financial Services' Victoria Guida and your host write.

Retaliatory tariffs are among the many headwinds buffeting farmers, along with unusually bad weather and a five-year decline in farm income. Even a deadly pig disease spreading in China is expected to slam demand for U.S. soybeans (a main ingredient in animal feed) for years to come, even if the trade war with Beijing is resolved.

"How many black swans have we had in the past couple years?"said Grant Kimberley, a corn and soybean grower in Iowa. "We've had weather, we've had African swine fever, we've had trade wars. I'd say this is pretty unprecedented. We haven't seen anything like this since the '80s."

By the numbers: Weakness in the farm economy is threatening to pose problems for agricultural lenders, especially in the Midwest. During the first quarter of 2019, the default rate for farm loans held by banks hit its highest level in seven years.

One in five farm borrowers increased the amount of debt they carried over from the prior year in the first quarter, according to the Federal Reserve Bank of Kansas City. And producers are estimated to hold nearly $427 billion in debt this year — the most since the 1980s farm crisis.

"When the ag economy starts taking a downturn, it affects [rural banks] because it's not only farm loans, it's also those businesses that sell to farmers" that get hurt, said Mark Scanlan, senior vice president of agriculture and rural policy at the Independent Community Bankers of America.

Lenders that specialize in agriculture have been tightening credit standards as the situation for farmers becomes more dire, as well as relying more on USDA-backed loan guarantees. Farmers, for their part, are staying afloat by putting off equipment repairs and other investments in their operations, burning through equity or leaving the industry altogether.