Interest rates on most types of farm loans continue to move higher. A Kansas City Fed report says, following modest increases in short-term rates, commercial banks raised interest rates on loans used to finance various farm-sector purchases. Following a period of historically-low rates, interest rates increased most significantly on loans used to finance operating expenses. Operating loan interest rates have increased from a low level of 3.5 percent in 2015 to 4.9 percent in early 2018. Interest rates on other types of loans have also increased since 2015 but at a slower rate.
In addition to the steady increase in interest rates, very few loans in the first quarter of this year were made at less than four percent interest. Back in 2015, more than 40 percent of farm loans that were used to finance non-real estate originated with an interest rate of less than four percent. Back in 2015, only ten percent of farm loans carried an interest rate of more than six percent. In the first quarter of this year, only 21 percent of non-real estate farm loans were originated with an interest rate of less than four percent. About 22 percent of the loans originated this year had an interest rate of more than six percent.