Agricultural Lending

Livestock Loans

Loans to feeder livestock operations also are expected to be self-liquidating. If a feeder operation deteriorates and the loans warrant classification, the portion of the loan covered by the liquidation value of the feeders should be passed if there is a current, on-site, livestock inspection report detailing number of livestock, weight, and current market value. Due to the volatility of livestock values and the relative ease with which the livestock can be moved, the frequency of inspections should increase commensurate with the severity of the borrower’s financial problems.

The classification of loans to finance breeder livestock or dairy cattle is performed in a similar fashion to that of feeder loans. Although the primary source of repayment for such loans is the successful reproduction of the livestock or milk sales, the underlying liquidation value of the breeding or dairy livestock provides the same type of readily marketable, liquid collateral support as that of feeder livestock.

As with crop loans, secondary sources of repayment and the existence of other collateral may limit the severity of any classified portion.

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