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Rising Tides of Interest - The Shift in Farm Lending

Rising Tides of Interest - The Shift in Farm Lending


Kansas City stands as the central hub for many farm-focused financial activities, and 2023 has marked a significant shift in this domain. A recent report from the KC Federal Reserve Bank
For two consecutive quarters, commercial banks have reported a decrease in the volume of non-real estate farm loans. This decline isn't occurring in isolation. It's set against a backdrop of steadily climbing interest rates on agricultural loans. The trend has been consistent and upward, with the last six quarters witnessing a hike in these interest rates.

A national overview of agricultural lending shows borrowers and lenders are apprehensive due to rapid rate increases. They are wary of committing to fixed terms, resulting in 80% of non-real estate farm loans in the past year having variable rates.

Looking back to 2022, the scenario was considerably different. Over half of all farm loans boasted rates below 4.5%. Fast forward to the current year, and the median rate for fresh operating loans has nearly doubled, standing tall at 8.5%.

 

Photo Credit: gettyimages-artqu

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