Ag Loan Volumes Continue Rising As Lower Farm Incomes Persist

Apr 23, 2015

Loan volumes for almost all farming purposes rose at commercial banks, as many producers contended with tighter profit margins, according to the Federal Reserve’s Agricultural Finance Databook.

The report published by the Federal Reserve Bank of Kansas City found overall growth in loan volume was driven by increased borrowing for current operating expenses and livestock purchases. Persistently low crop prices and elevated input costs continued to increase farmers’ short-term financing needs, and high prices for feeder cattle further boosted loan volumes in the livestock sector.

Lower farm incomes kept loan demand strong throughout the Federal Reserve Districts surveyed, while loan repayment rates were slightly weaker. Despite reduced farm incomes and increased debt outstanding, loan delinquency rates declined and profits increased slightly at most agricultural banks.

Lower farm incomes also affected farmland values, but the changes varied widely among states. Farmland values in crop-intensive states decreased slightly, while demand strengthened for good-quality farmland and ranchland in states more concentrated in livestock production or with wealth generated from other sources, such as oil and natural gas exploration.

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