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Mediated ag debts, and amounts owed, continue decline

Contact: Allison Sandve 612-626-4077 office, 651-492-0811 cell;

ST. PAUL, Minn.(12/12/2013)—The number of lenders sending notices under Minnesota's Farmer-Lender Mediation program dropped by nearly half in the fiscal year ending Sept. 30, 2013. During the same time, the overall amount of debt taken to mediation decreased by more than half from the previous year.

A total of 1,566 notices were filed by creditors - the lowest number since the 2005 fiscal year. During the most recent year, there were 569 requests by debtors for reach settlement with lenders. In 1,043 additional cases, the right to use mediation to resolve debt was waived by the farmers involved.

Comparatively, 2,919 notices were filed in the previous year, and 1,250 requests for mediation were received. The amount of debt addressed in mediation dropped by 58 percent from $221 million in fiscal year 2012 to $92 million for fiscal 2013. The most recent annual report for farmer-lender mediation is available here (PDF).

"We continue to see better times for agriculture. At the same time, there remain situations where farmers and lenders rely on this program to help them work together to renegotiate, restructure or resolve the situation," said Dick Senese, senior associate dean of University of Minnesota Extension.

"Both crop and livestock producers have been profitable and debt-to-asset ratios are at the lowest levels since 1991. With declining crop prices, expectations are that profits will be lower going into 2014 for crop producers while livestock producers may benefit from the lower crop prices," said Brian Buhr, Extension economist and interim dean of the College of Forestry, Agriculture and Natural Resource Sciences. "This may increase profitability variation among producers depending on their purchase price of land with rising prices and their land rental values."

Minnesota law requires creditors with a secured debt of more than $5,000 against an agricultural asset to offer mediation before proceeding with foreclosure, repossession, cancellation of a contract or collection of a judgment.

Farmers who are offered mediation can take advantage of a 90-day period to work with lenders to renegotiate, restructure or resolve the situation. A team of mediators, financial analysts and other University of Minnesota Extension professionals serve as neutral parties to guide and manage mediation.

Mediation is an informational, confidential process that generally requires less cost and time than adversarial court action. To be eligible for mediation, an agricultural borrower must own or lease more than 60 acres and earn more than $20,000 in gross agricultural products the preceding year.

Extension's Farmer-Lender Mediation Program is part of the United States Department of Agriculture's Certified State Agricultural Mediation Program. The number of notices received is far more than the number of farms involved in mediation. Most Minnesota farm enterprises involve multiple family members and each member or entity whose name appears on a debt obligation may receive a notice offering mediation.

For more information on Extension's Farmer-Lender Mediation Program, visit here.

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