KC Fed: Large Loans Drive Further Increases in Farm Lending
USAgNet - 07/19/2019
Growth in the average size of farm operating loans boosted agricultural lending in the second quarter of 2019 according to the Federal Reserve Bank of Kansas City's Agricultural Finance Databook.
The volume of loans increased 11 percent compared with last year, the fastest pace of growth in the second quarter since 2011. Operating loans continued to comprise the majority of non-real estate farm lending and increased more than 16 percent.
The volume of non-real estate farm loans exceeding $1 million was notably higher than previous years and contributed significantly to the average size of loans. According to the survey data, the volume of new non-real estate loan originations at commercial
banks totaled more than $800 million in the second quarter. Large loans also contributed significantly to increased agricultural lending activity at commercial banks in the second half of 2018.
The average duration of farm loans also has lengthened alongside elevated demand for financing, another potential signal of increased credit stress. Despite increased pressure from weaker farm finances and recent increases in interest rates on farm loans,
farmland values continued to hold relatively steady.