Kevin Perrinjaquet, an Iowa farmer who owns a mill that provides feed for 600,000 hogs, has witnessed the disruption and suffering caused by the coronavirus pandemic first hand.

"Where grocery stores may have seen it difficult to stock the shelves with meat and milk and eggs, the farmers that produce those products were swimming in product and all those products became very unprofitable," Perrinjaquet said in an interview.

"They were dumping milk on the ground, they were euthanizing 300-pound hogs that had no place to go," Perrinjaquet said. "That chain is very, very tight. You disrupt part of it, and it can fall apart really quick."

Farmers across the U.S. are grappling with this kind of disruption, which Perrinjaquet said could take years to correct. Animal and ethanol production plants closed as the coronavirus spread. As states nationwide issued stay-at-home orders, restaurants closed, demand for food dropped and commodities prices fell. Unable to sell their products, farmers lost out on income.

The economic impact for the U.S. could be significant. Agriculture, food and related industries contributed $1.053 trillion to the U.S. GDP, or 5.4%, according to data from the U.S Department of Agriculture's Economic Research Service for 2017, the most recent year available. Output from farms contributed $132.8 billion to that number, or about 1% of GDP.

The disruption will have knock-on effects for the banks that lend to farmers. Banks reported $179.52 billion in agriculture loans at March 31, according to S&P Global Market Intelligence data. Amid the pandemic, 2.68% of total agriculture loans were delinquent in the first quarter of 2020, marking the highest level since the first quarter of 2012. Delinquencies were up on both farm loans, which finance land, and agricultural production loans, which finance things like equipment and seeds.

Animal producers are being hit the hardest, said Bruce Lee, president and CEO of Dubuque, Iowa-based Heartland Financial USA Inc. Heartland operates in states throughout the Midwest, Southwest and Western U.S. and had $549.2 million in agriculture loans in its portfolio at March 31, representing 6.54% of its loan book.

"It became difficult to get your animals to a production facility," Lee said. "[Farmers] couldn't get their animals to market and couldn't afford to feed them either, so that created a problem."

Dairy farmers have also struggled as milk prices cratered early in the crisis before rebounding in June. Wisconsin, home to many of the nation's dairies, led the country in farm bankruptcies in the first quarter.

But bankruptcies are a lagging indicator, said David Kohl, professor emeritus of agricultural finance at Virginia Tech. Kohl expects that bankruptcies caused by the pandemic will not show up for at least a year.

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The Midwest has suffered the most damage from the pandemic and low commodity prices, raising concerns about the concentration of agriculture production in the U.S., said Kohl.

"Concentration and bigness brings efficiency and optimization, but it also hurts us on diversification and resiliency," he said.

Banks like Heartland that lend to agriculture producers are using government programs, assessing their portfolios and providing interest-only and principal deferment to help bridge their agriculture producers through the cycle, Kohl said.

And Lee said Heartland is working with individual farmers to help keep their agriculture portfolio healthy through this period.

"[We've] increased communications with borrowers. I'm not sure that we really changed our underwriting," Lee said. The bank so far has experienced little in the way of losses, he said, partly because the borrowers have high collateral values on their land.

Financial regulators also offered a lifeline, telling banks in March that loan modifications for borrowers affected by the novel coronavirus would not require an accounting classification known as troubled debt restructurings, or TDRs, even if loans are deferred for up to 180 days. By that point, many farmers will likely have harvested crops and will be able to pay off loans, said Andrew Liesch, a managing director at Piper Sandler Cos.

"I've not heard of too many [TDRs] just yet, as 180 days basically puts you through the planting season," he said. "It wouldn't surprise me to see an increase in problem loans late this year."

But farmers are used to operating under difficult conditions — in 2019 they faced heavy flooding, and new tariffs in a trade war with China have put significant stress on the price of commodities like corn and soybeans — and agriculture banks are prepared for stress, Liesch said. He likened the current downturn in agriculture to the farm crisis in the 1980's, when falling land prices, high production and reduced exports after an embargo against the Soviet Union combined with high interest rates led to a rise in farm debt.

"A lot of these lenders have been in the business for more than one cycle," Liesch said. "They know how to manage through challenging agriculture times."