Home Indiana Agriculture News Limited Demand for Farm Loans, But Strong Profits for Ag Banks

Limited Demand for Farm Loans, But Strong Profits for Ag Banks

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Agricultural lending at commercial banks continued to decline but showed some signs of stabilizing in the third quarter.

Data reported by the Kansas City Federal Reserve Bank Wednesday shows farm debt decreased at the slowest pace in two years. Non-real estate debt declined substantially slower than in recent quarters, and farm real estate loans increased slightly for the first time since mid-2019.

Performance on agricultural loans also continued to improve, leading to a five-year low in delinquency rates.

With support from stronger loan performance and lower interest expense, profitability for farm lenders remained near historic highs.

Prospects for farm income in 2021 remained strong heading into year-end alongside continued strength in commodity markets. Elevated commodity prices have boosted revenues for producers and supported a swift improvement in agricultural credit conditions and a surge in farmland values.

However, rising input costs are likely to increase credit needs and stress profit margins going forward.