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Kansas City Fed: Agricultural Financing Activity Slowed in Second Quarter

In an update last week from the Federal Reserve Bank of Kansas City (“Agricultural Lending Consistently Slower“), and

“Agricultural Lending Consistently Slower,” by Nathan Kauffman and Ty Kreitman. The Federal Reserve Bank of Kansas City (July 16, 2020).

More narrowly, the report indicated that, “The overall reduction in lending was driven by a decrease in loans for nearly all purposes.”

“Agricultural Lending Consistently Slower,” by Nathan Kauffman and Ty Kreitman. The Federal Reserve Bank of Kansas City (July 16, 2020).

And with respect to interest rates on loans, Kauffman and Kreitman pointed out that, “Interest rates on non-real estate loans decreased alongside a decline in benchmark rates.

The average rate charged on all types of non-real estate loans neared historical lows in the second quarter.

“Agricultural Lending Consistently Slower,” by Nathan Kauffman and Ty Kreitman. The Federal Reserve Bank of Kansas City (July 16, 2020).

Last week’s update explained that, “Alongside continued weaknesses in the agricultural economy and the initial effects of the pandemic, farm loan delinquency rates continued to edge higher. Excluding Rabo N.A. from all previous periods, the volume of delinquent farm real estate and non-real estate loans increased about 17% and 13%, respectively.”

“Agricultural Lending Consistently Slower,” by Nathan Kauffman and Ty Kreitman. The Federal Reserve Bank of Kansas City (July 16, 2020).

“Alongside increases in farm loan delinquency rates, agricultural credit conditions remained weak in the first quarter,” the Fed report said; adding that, “According to Federal Reserve District Surveys, farm loan repayment rates deteriorated at a steady pace across all regions in late March.

Farm Income also remained weak in all reporting Districts and expectations about the coming months were slightly more pessimistic.

“Agricultural Lending Consistently Slower,” by Nathan Kauffman and Ty Kreitman. The Federal Reserve Bank of Kansas City (July 16, 2020).

Nonetheless, with respect to land values, the Fed update stated that, “Despite a more pessimistic environment for farm income and credit conditions, farmland values remained relatively steady in the first quarter. Compared with the previous year, the value of nonirrigated cropland changed by less than 5% in all reporting states except Texas. In states where values were lower than a year ago, the average decline was about 2%. Across all other states, values increased about 4% on average.”

“Agricultural Lending Consistently Slower,” by Nathan Kauffman and Ty Kreitman. The Federal Reserve Bank of Kansas City (July 16, 2020).

Kauffman and Kreitman added that, “Government payments in the agricultural sector appear likely to limit the severity of financial stress among farm borrowers in the coming months, but uncertainty about longer-term prospects is likely to remain elevated.”

Keith Good

Keith Good

Keith Good is the social media manager for the farmdoc project at the University of Illinois. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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