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Farm Loan Performance Strong as Debt Grows

Farm debt balances at commercial banks grew steadily in the third quarter, but loan performance remained strong in the Kansas City Fed’s District.

Despite some indications of slower lending activity in recent surveys and subdued loan demand for some lenders, outstanding debt at commercial banks, in aggregate, grew at a pace similar to last year. Alongside ongoing strength in farm finances, delinquency rates on agricultural loans dropped for the third consecutive year and remained at historically low levels. Steady loan growth has coincided with a pullback in deposit growth and firmed liquidity at agricultural banks. Profits for agricultural banks have stayed solid with support from higher interest income.

The balance of agricultural debt continued to increase alongside a growing demand for production loans. According to commercial bank Call Reports, farm debt was five percent higher than the same time last year and increased at a similar pace for almost two years.

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