The Federal Reserve Bank of Kansas City says farm lending activity at commercial banks increased during the first quarter of 2022 due to a significant increase in the size of operating loans.
With some input costs surging in recent months, the volume of operating loans increased sharply from a year ago, and non-real estate lending increased on a rolling four-quarter basis for the first time since mid-2019. While the outlook for the U.S. ag economy in 2022 remains strong alongside higher commodity prices, rising input costs are raising concerns about future profitability.
The escalation of the conflict in Ukraine and associated market disruptions are pushing commodity prices even higher. The turmoil is also causing rapid increases in the price of major inputs like fuel and fertilizer sourced from Russia and Ukraine. Concerns about the cost and availability of agricultural inputs intensified, and higher feed prices could also put pressure on profit margins for livestock producers.
