Farm lending has stabilized in the face of low agricultural profit margins, says a quarterly Federal Reserve report on ag banks. Operating loans, to pay day-to-day expenses, have accounted for nearly 60 percent of non-real-estate loans for the past year, “the highest in the 40 year survey history,” says the report of conditions nationwide.
“Although farmland values have continued to moderate in most areas, values have stabilized in some states, and generally have remained strong overall,” said the Agricultural Finance Databook. “In Iowa, Illinois, southern Wisconsin, and Texas, the value of farmland increased slightly from the previous year. Farmland values in other parts of the Corn Belt, such as Illinois, Indiana and Missouri, continued to decline modestly, but remained well above values of a decade ago.”
Bankers have raised interest rates on non-real-estate loans by 1 percentage point since rates bottomed out in 2017, said the Databook. Loan are being issued with longer maturity dates, allowing producers more time to repay them. Delinquency rates are higher than a year ago but at nearly 2 percent for all types of farm loans combined, they are lower than the average loan delinquency rate.
“Liquidity remains a concern for some borrowers and also for some lenders. Some borrowers may find it increasingly difficult to obtain credit amid low profits,” said the quarterly report compiled by the Kansas City Fed.