Farm Lending Activity Grows Swiftly

Lending at commercial banks associated directly with farm production strengthened in the second quarter. According to the Survey of Terms of Lending to Farmers, the volume of new operating loans increased 20% from a year ago, which followed a year-over-year increase of 12% last quarter. The rise in lending activity was primarily attributed to larger loan sizes at small and mid-sized lenders and was accompanied by a slight increase in average interest rates and slightly longer maturities.

Following several years of subdued activity, demand for farm loans has rebounded alongside elevated production expenses and a moderation in farm sector liquidity. Alongside strong growth in new lending, outstanding non-real estate loan balances at commercial banks have surged.

Despite climbing swiftly from low levels in recent years, outstanding balances and new volumes of operating debt remain below historic averages after adjusting for inflation. Additional contraction in farm incomes and liquidity would likely increase financing needs further and interest costs could become increasingly burdensome for some agricultural producers.

  https://www.kansascityfed.org/agriculture/agfinance-updates/farm-lending-activity-grows-swiftly/