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KC FED REPORTS LIMITED DEMAND FOR FARM LOANS, STRONG PROFITS FOR AG BANKS
Dec. 2, 2021
Source: Federal Reserve Bank of Kansas City
Agricultural lending at commercial banks continued to decline but showed some signs of stabilizing in the third quarter. According to Call Report data, farm debt decreased at the slowest pace in 2 years.
Non-real estate debt declined at a substantially slower rate than recent quarters and farm real estate loans increased slightly for the first time since mid-2019.
Performance on agricultural loans also continued to improve rapidly, leading to a five-year low in delinquency rates. With support from stronger loan performance and lower interest expense, profitability for farm lenders remained near historic highs.
Prospects for farm income in 2021 remained strong heading into year-end alongside continued strength in agricultural commodity markets. Elevated commodity prices have boosted revenues for producers and supported a swift improvement in agricultural credit conditions and a surge in farmland values. At the same time however, input costs have risen considerably in recent months, which is likely to increase credit needs and weigh on profit margins going forward.
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