Farm Lending Continues to See Growth
The Kansas City Federal Reserve released a report last week showing continued growth in farm lending.
Some of the highlights of the report are:
Loan volumes for non-farm real estate loans are up about 7% from the previous quarter and about 15% for the year primarily due to the increased farm input costs. However, strong farm liquidity has likely hampered any increase. Input costs are up but farmers had a very strong 2022.
Chart 2 shows the trends in farm lending, operating expenses and debt service ratio. Although operating expenses accelerated rapidly this year, actual farm lending has remained muted compared to the operating expense increase. Also, debt service ratios are now approaching 120% which is similar to the 2012-2013 timeframe. This ratio was negative for several years between 2015-2020.
Average interest rates increased about 125 basis points from the previous quarter. Average rates are somewhere between 6% and 7% depending on the size of the bank.
The bottom line is farm lending is fairly healthy right now and we will see how the trend continues.
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