In a new report from the KC Federal Reserve Bank, the first half of 2023 saw farm lending activity at commercial banks slow. For the second quarter in a row, the volume of non-real estate farm loans at commercial banks declined. For the sixth quarter in a row, the average interest rates on ag loans increased.
Based on their national research of lending to farmers, Nate Kauffman and Ty Kreitman say rapid rate increases have borrowers and lenders less interested in locking in terms for the duration of the loan. Over the last four quarters, nearly 80% of non-real estate farm loans were booked with a variable rate. At the beginning of 2022, more than half of all loans had a rate less than 4.5%, now the median rate for new operating loans is 8.5%.
The report summarizes the rise in rates has been mostly consistent across banks of all sizes.
