A Switch in Farm Loan Levels

Published on: 10:40AM Jul 21, 2011

The Federal Reserve Bank of Kansas City just published their National Trends in Farm Lending for the second quarter of this year.

Due to the increase in input costs, operating loan levels have increased dramatically from the second quarter of 2010, up nearly 36%.  The number of livestock loans dropped slightly from the year before, however, the average loan amount almost doubled, pushing the volume of livestock loans more than 25% higher.

Capital spending on the farm for machinery and equipment seems to have cooled during this quarter.  Loan volumes for farm machinery and equipment plunged from a first quarter spike and were 36% below the year-ago levels.  I have a feeling that the 50%/100% bonus depreciation enacted late last year has soaked up a lot of the demand for new equipment and these types of sales may remain low until year-end.

The average borrowing rate on operating loans fell from 5.3% to 4.7%, however, the rate for equipment loans did incur a slight uptick to almost 5.4%.