With interest rates and production costs high, growers’ needs for credit have increased. According to the Kansas City Fed, however, the outlook for agricultural credit conditions remains strong.
Real Estate Vs. Production Loan Growth
Graph Credit: KC Fed
Overall, agricultural loan balances at commercial banks increased 5% in the second quarter. However, the growth differed between real estate and non-real estate loans.
Outstanding farm production loans increased 7% at commercial banks and 10% at agricultural banks (banks where agricultural loans make up at least a quarter of total loans) from a year ago. Growth in farm real estate loans has slowed slightly, but still up 5% at commercial banks and 8% at agricultural banks.
Farm debt in general increased at nearly half of all banks and 80% of agricultural banks.
Strong Farm Finances
Graph Credit: KC Fed
Though overall farm loan balances have grown, delinquency rates have reached the lowest level since 2010 for both farm real estate and farm production loans – keeping the overall credit quality at agricultural banks strong.
Balances decreased on non-accruing loans, as well as loans that were past due 90 days or more. There was a small increase, however, in loans that were past due between 30-89 days. This increase was balanced by the strong decrease in longer term delinquencies.
