Despite a global slowdown in 2020 brought on by COVID-19, agricultural lending by U.S. farm banks remained strong at $98.6 billion, just a 1.8 percent drop from the prior year. The American Bankers Association’s annual Farm Bank Performance Report attributes the change to a 6.7 percent decline in agricultural production loans. By contrast, the outstanding loans secured by farmland increased 2.1 percent to $56.7 billion.
The report says rising costs, supply and production bottlenecks, price volatility, and a significant increase in federal cash payments depressed demand for agricultural production loans in 2020. Government payments also helped producers pay down existing loan balances.
The Chief Economist for the ABA says American farm banks have remained healthy over the past year and continue to play a critical role in supporting farmers and the broader U.S. economy through the turbulence of 2020.
The report also says the strong asset quality and capital levels of America’s farm banks will help ensure that they continue to provide support to rural communities. Farm banks also continued to build strong capital reserves throughout 2020 and are well-insulated from risks associated with the agriculture sector. Equity increased nine percent to $52.6 billion.