Non-Real Estate Loans Increased in 2023

The Kansas City Federal Reserve reported that farm operating debt levels accelerated in 2023.

Photo by Jason Dent on Unsplash

The Kansas City Federal Reserve released a report last week showing that farm operating loans increased during 2023 from the previous year.

Farm operating loans steadily decreased during the period 2019-2021 primarily due to the large amounts of fiscal stimulus during the pandemic. The debt started to increase in 2022 due to higher input costs and during 2023 farm operating loan levels increased more than 7% from 2022 levels.

Farm real estate debt adjusted for inflation peaked in 2018 but are still at high levels compared to historical levels.

Although debt is higher, loan performance remained strong with very low delinquencies, but loans past due more than 90 days did increase slightly.

The last chart shows the percent change in Interest expense, interest income and net interest income and as expected the increase in interest expense is dramatic. The period from 2001 to 2021 saw a maximum increase in interest expense of no more than about 50%. Whereas in 2023, the increase was close to 250% from the pervious year. If the Federal Reserve does cut rates this year, we will see a reversal of this increase in 2024 (at least partly).

Even though we are headed into a period of lower prices and higher input costs, the farm economy is still healthy.