The total value of U.S. exports has grown at an average annual rate of six percent since 2002,...
by Nate Kauffman and Ty Kreitman, Federal Reserve Bank of Kansas City
New non-real estate farm lending activity at commercial banks continued to decline in the fourth quarter of 2023. According to the Survey of Terms of Lending to Farmers, the volume of new non-real estate farm loans was about 15% less than a year ago during the final months of 2023. The number of new loans increased from a year ago, but average loan sizes were notably lower. The sharp climb in farm loan interest rates abated during the quarter as average rates increased modestly for some types of loans and dropped slightly for others.
Many lenders continued to report subdued demand for farm loans, while others highlighted growing demand. Elevated production costs, higher interest expenses and lower commodity prices have increased financing needs of many producers, however, strong liquidity built up in recent years likely supplemented borrowing needs of some operations throughout the year.
Fourth Quarter National Survey of Terms of Lending to Farmers
Agricultural lending activity slowed at a swift pace over the past year. The volume of new non-real estate farm loans at commercials banks declined for the fourth consecutive quarter and was about 15% less than a year ago (Chart 1, left panel). The number of new loans was slightly higher than a year ago, but the average loan size adjusted for inflation was the lowest since 2017 (Chart 1, right panel).
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EDITOR’S TAKE:
The highlighted portion of the article pretty much tells the story. Farmers and ranchers are still in a strong financial position that allows them the flexibility to borrow less and use stored up cash to finance their operations when interest rates are higher. Obviously, many farmers still borrow a portion of their financing needs, but make every attempt to keep debt manageable. You can assist them with their quest to find unique ways to minimize borrowing. How? AgPack® is an excellent tool to help farmers/ranchers offset operating expenses. They could potentially have up to $32,000 in exclusive rebates and discounts when they purchase that new truck from you, a CAD member. We now also have CADFI, a unique financing option that allows you to fashion payments to fit that farmer’s/rancher’s cash flow. Both of these financial tools are designed to help farmers/ranchers, but they also provide you with a strong competitive advantage over non-CAD dealers. Be sure to use them to your benefit!
