Farm Debt Drops in Second Quarter

The decline in ag production loans issued at commercial banks helped loan balances drop by 5% in the second quarter compared to last year, according to a recent Federal Reserve Bank of Kansas City report. Some banks saw loan balances drop more than 10% from 2020. The Chicago Fed recorded a 35-year low in their Farm Loan Demand Index. Chicago’s Fed District banks made fewer farm operating and real estate loans than normal, according to responding bankers during the first six months of 2021.

Declines in the Kansas City Fed District were most substantial among lenders with both the smallest and largest farm loan portfolios and among agricultural banks with high concentrations of farm loans, the report noted. It also forecast farm income will reach an eight-year high in 2021, as the ag economy continued to hold strong through the first six months of this year. 

EDITOR’S TAKE:

Increasing incomes, decreasing debt and purchasing equipment, buildings and other capital improvements mean things are going well down on the farm. Farmers and ranchers are also adding billions of dollars to their collective balance sheets vis a vis rapidly increasing land values (see article on land sales in last week’s AIR). Frankly, your CAD team feels we may be experiencing the next golden age of agriculture. Farmers and ranchers overwhelmingly are solid credit risks and getting even better as conditions improve. So, now is a perfect time to put farmers/ranchers at the top of your prospect list and talk to them today!