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KANSAS CITY FED AG FINANCE UPDATE: LARGER LIVESTOCK LOANS BOOST FARM LENDING
Oct. 21, 2021
Source: Federal Reserve Bank of Kansas City news release
Demand for livestock loans grew in the third quarter, boosting agricultural lending activity at commercial banks. Demand for operating loans was more subdued however, and total non-real estate lending remained near its average of the past decade.
The average size of loans for some livestock categories reached an all-time high and contributed to the increased lending. While the average size of operating loans also remained elevated, a smaller number of loans limited the overall financing of operating expenses.
The U.S. agricultural economy generally remained strong as elevated commodity prices continued to support farm incomes. Prices of most major crops were at multi-year highs moving into fall harvest and supported farm revenue prospects.
Weakness in the cattle industry persisted, however, as low cattle prices continued to limit profit margins for producers. In addition, concerns about drought and higher input costs continued to intensify and likely contributed to an increase in producers' financing needs in the livestock sector.
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