Farm Lending Activity Slows in the First Quarter

Growth in farm lending continued to show signs of slowing, even prior to the emergence of COVID-19 and the resulting economic conditions the outbreak caused. A report from the Federal Reserve in Kansas City says the volume of operating loans in the first quarter actually increased from 2019. However, the overall demand for non-real estate loans declined.

Despite a decline in most types of lending, loans for operating expenses increased by nearly 10% from the previous year. The overall decline was driven by a drop of about 30% in both livestock loans and miscellaneous loans. At the end of 2019, delinquency rates on farm loans continued to increase slightly, but agricultural credit conditions and farmland values were holding steady.

Capital cushions at agricultural banks, which increased steadily in recent years, remained at historically high levels through last year. As the effects of the current economic disruption continue to materialize in the months ahead, the current stability of farm real estate values and financial soundness of farm banks could be key sources of support for the entire agricultural sector.

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