Large Banks Cut Farm Interest Rates, Gain Volume

October 31, 2011 10:30 AM
Large Banks Cut Farm Interest Rates, Gain Volume

Despite softer national loan activity, larger banks cut interest rates on non-real estate loans to boost farm lending in the third quarter, according to the Federal Reserve System’s Agricultural Finance Databook.

Large banks, those with farm loan portfolios greater than $25 million, dropped the average effective interest rate on non-real estate farm loans to 3.6% during the quarter, well below the rate charged at small or mid-sized banks, the Fed says.
These lower interest rates spurred sharp annual gains in non-real estate loan volumes at large banks, compared to declines at small or mid-sized banks. Large banks originated most of their loans with floating interest rates, while small and mid-sized banks extended variable rates on less than half of their loans, the Fed report states.
Still, overall farm lending was flat in the third quarter as strong agricultural profits limited non-real estate loan demand. Operating loan volumes held steady with higher input costs, but equipment and livestock loan volumes fell below year-ago levels.
In contrast, farm real estate loans accounted for a larger share of farm lending during the third quarter. National farmland values climbed higher in the second quarter, with anecdotal evidence of further gains during the third quarter.
Annual farmland value gains reached record levels in many states, most notably in the Corn Belt and Northern Plains where land prices rose more than 25% above year-ago levels.
For More Information


Back to news


Spell Check

5/16/2012 10:21 PM

  In general, to obtain an FSA farm ownership loan, a beginning farmer must not be able to get credit elsewhere; must have participated in the business operations of a farm for not less than 3 years but no more than 10 years; must agree to participate in borrower training; must not already own farmland in excess of 30% of the average farm size in the county; and must provide substantial day-to-day labor and management.


Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer