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KC FED RELEASES AG FINANCE DATABOOK, BANKS MAINTAIN STEADY RATE, RISKS REMAIN.
Source: Federal Reserve Bank of Kansas City news release

Agricultural lending at commercial banks maintained a steady rate in the second quarter of 2017, but risks in the farm sector continued to weigh on loan growth and credit conditions, according to the Federal Reserve's Agricultural Finance Databook.

The volume of non-real estate farm loans increased only slightly from a year ago as interest rates continued to trend up at a modest pace and maturities continued to lengthen. Persistent declines in farm income have likely slowed the volume of new non-real estate loans as bankers and borrowers have sought to manage risk.

Similar to recent trends in farm loan originations, farm debt outstanding at commercial banks remained stable in the first quarter. Farm loan delinquencies edged higher in the quarter but remained historically low. The performance of agricultural banks generally remained strong, even as farmland values in most areas continued to decline.

If farm income remains low, agricultural lenders may need to adjust to an environment of persistently sluggish loan growth and heightened risk in their farm loan portfolio.

The Agricultural Finance Databook is a quarterly compilation of national and regional agricultural finance data. The report is available at https://www.kansascityfed.org/research/indicatorsdata/agfinancedatabook/articles/2017/07-14-2017/ag-finance-dbk-07-14-2017.


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