By Scout Nelson
Commercial banks reported weaker farm lending activity during the second quarter of 2026, with new non-real estate agricultural loan originations declining across most categories. The slowdown was driven by lower borrowing demand and smaller loan sizes at banks with large agricultural portfolios. Despite reduced lending activity, farm loan interest rates remained relatively stable and continued to stay above historical averages.
Lower energy and fertilizer prices helped reduce operating costs for some farmers. However, many crop producers continued to face tight profit margins as commodity prices declined. Strong cattle prices and farmland values near record highs in several agricultural regions provided ongoing support to the farm economy.
Non-real estate farm loan volumes fell sharply from the previous quarter, partly due to seasonal trends, and were about 10% below the average of the past two years. Most loan categories recorded declines, although loans for farm machinery and equipment increased significantly compared to recent-year averages.
Loan size trends varied among lenders. Banks with small and mid-sized farm loan portfolios increased average loan amounts compared to last year, while banks with larger agricultural portfolios reported smaller average loan sizes. Borrowing for feeder livestock and operating expenses remained stronger than other loan categories.
Interest rates changed little during the quarter. Average rates on loans above $100,000 remained just under 7%, while smaller loans carried rates slightly above 7%, similar to recent quarters.
The findings are based on data from the Survey of Terms of Lending to Farmers and highlight ongoing challenges and opportunities within the U.S. agricultural lending sector.
Photo Credit: pexels-karolina-grabowska
Categories: Kansas, Crops, Livestock