Alongside strong growth in farm loans, liquidity at commercial agricultural banks tightened and earnings increased during the third quarter, the Kansas City Federal Reserve Bank reported Wednesday.
Citing the Reports of Condition and Income, the Kansas City Fed said the average loan-to-deposit ratio at agricultural banks increased to the highest level since 2019 and rose comparably more at lenders with the highest concentration of farm loans. Liquidity declined alongside consistently strong growth in non-real estate farm debt, which also supported an increase in average net interest margins and return on assets. Demand for farm loans has grown steadily alongside softening in farm financial conditions and farm loan delinquency rates increased slightly from a year ago but remained relatively low, the report said.
farmloan1218.png (1084x862, AR: 1.26)The regional Fed bank said the outlook for the U.S. farm economy remained subdued alongside weakness in the crop sector, but that strength in the cattle sector has lifted conditions in some regions and recently announced government assistance would provide support to farm incomes. Disparities in the crop and cattle sectors have been evident in credit conditions but despite profitability challenges for crop producers, aggregate farm financial stress has remained limited, the report said.
Ad hoc government payments associated with the American Relief Act and resilient farm real estate values have eased some strain in the sector throughout 2025. Looking ahead, market conditions in the crop sector are likely to keep profit opportunities narrow, but the recently announced Farmer Bridge Assistance Program will provide some relief to crop farmers in the coming months, the report said. Read more from Pro Farmer.
