Ag bankers reported more than 40 percent growth in the volume of new operating loans during the summer compared to the third quarter of 2023, said the Kansas City Federal Reserve Bank. “For the first time in at least two decades, the volume of loans larger than $1 million eclipsed the volume of loans smaller than $1 million,” said the regional Fed, based on a survey of banks across the nation.
“Weak profit margins in the crop sector continued to weigh on the farm economy even as prospects in the cattle industry remained strong,” said the Kansas City Fed in an Ag Finance Update. “Farm operating debt has grown at a rapid pace alongside lower crop prices and persistently high production costs while lending activity for other types of loans has softened.”
Small and mid-sized lenders drove the increase in the number of loans and the size of loans. Interest rates on farm loans remained elevated but loans were made for shorter periods overall. The average duration of non-real-estate loans shortened by five months from the previous quarter.
“According to the Survey of Terms of Lending to Farmers, the volume of new operating loans at commercial banks increased over 40 percent from last year, following annual growth of about 20 percent the previous quarter,” said the Kansas City Fed.