The Kansas City Federal Reserve Bank Thursday announced farm debt in the Midwest is increasing. In the first quarter of 2016, the bank says loan demand continued to rise, repayment rates continued to weaken, and almost all district bankers under the KC Fed Bank reported that farm income declined. The Bank released its Ag Credit Survey, which says that, although cash rents declined modestly, production costs have remained high and many producers reduced both capital and household spending to cut costs. Farmland values also moderated slightly and were expected to remain under pressure in the coming year. Through the first quarter, survey respondents reported three full years of increasing loan demand amid reduced profits.
Bankers noted that poor cash flow prevented many borrowers from paying off loans from the previous year, causing them to carry outstanding debt into the first quarter. Further, bankers noted that more than 18 percent of loans made in the first quarter involved restructuring existing debt to meet short-term liquidity needs.
Souce: NAFB News Service