Strong credit demand from U.S. farmers pushed the average size of operating loans to a record and pushed up lending volumes in 2025, according to the National Survey of Terms of Lending to Farmers conducted by the Federal Reserve.
The fourth quarter saw strong demand for operating loans, boosting farm-lending activity at commercial banks, said Ty Kreitman, associate economist at the Kansas City Federal Reserve, in a paper published Friday.
According to estimates from the survey, the volume of new farm operating loans rose nearly 40% from the previous year in the fourth quarter and grew by an average of more than 20% in 2025. While the rise in non-real estate lending during the fourth quarter was attributed to operating expenses, increased feeder-livestock lending also contributed to growth in activity throughout most of 2025, the survey found.
Adjusting for inflation, the average size of farm operating loans during 2025 was 30% larger than the prior year, following similar growth during 2024. Loan sizes have grown alongside elevated production expenses and pushed operating loan volumes well above the average of the past two decades, Kreitman noted.
Among the findings:
- Farm loan interest rates remained above the average of recent decades but declined for the sixth consecutive quarter. The share of non-real estate loans with a variable rate increased from below average levels and average loan maturities increased.
- The farm economy outlook remained subdued amid weakness in the crop sector, but “aggregate farm financial stress” remained limited, Kreitman wrote. Direct government payments and resilient farm real estate values have eased some of the strain from a weak profit picture for crops, while strength in the cattle sector has lifted income in many areas.
- Demand for farm loans has grown alongside tighter working capital, elevated production costs and a surge in cattle prices.
- Market conditions in the crop sector are likely to keep profit opportunities narrow in the months ahead, the survey indicated, prolonging challenges for growers that have led to steady deterioration in agricultural credit conditions.
