The strong agricultural economy, fueled by high commodity prices, has reduced farmers’ reliance on farm lenders, despite concerns about rising input costs, according to a Federal Reserve survey of ag bankers. “Higher costs are likely to put upward pressure on demand for credit, but strong farm income and working capital could also supplement financing for some borrowers,” said a Kansas City Federal Reserve Bank summary.
Overall, banks advanced a smaller amount of money in non-real estate loans during the fourth quarter of 2021 than in the same period of 2020. The average volume of non-real estate loans in the past 12 months reached a nearly 10-year low, with fewer farm operating loans driving most of the decline.
Non-real estate loans cover an array of expenses, from livestock to farm equipment, and operating loans cover the day-to-day costs of crop and livestock production. The nationwide survey of farm bankers found that the average size of a non-real estate loan, roughly $83,000, was more than 20% smaller in October, November, and December 2021 than in the fourth quarter of 2020. Operating loans, at an average of $55,500, were more than 30% smaller.
“Overall, the agricultural credit market is riding several positive trends into 2022,” wrote Purdue economists Brady Brewer and Todd Kuethe in an outlook on agricultural credit this year. Low interest rates and rising land values in 2021 improved farm balance sheets.
EDITOR’S TAKE:
If you’re not convinced yet of just what great prospects farmers/ranchers are for CAD members, read this article again! This is truly unprecedented in recent times that farmers and ranchers have the ability to self-fund versus borrow operating money from the bank. And, as the article points out, this was a nationwide survey, so it’s not just one region or two. It’s time to realize that as inflation riddles the general economy and consumers pull back their purchases just as new inventory is arriving on your lot, who your best prospects are for 2022. We’ll remind you again, “Look Beyond your Lot” to the farmers/ranchers who could be your best customers, in our humble opinion.
