Farm Lending and Interest Rates Rise in the Second Quarter
Larger loans continued to boost lending activity in the second quarter of 2022 while farm loan interest rates edged higher. The Federal Reserve Bank of Kansas City said the volume of non-real estate agricultural loans grew steadily alongside an increase in the number and average size of loans. Interest rates remained historically low but continued to increase in recent quarters and on nearly all types of farm loans as benchmark rates continue rising. The average maturity of some types of loans, particularly for real estate, also increased during the quarter and was above recent historic averages.
The Kansas City Fed added farm lending activity showed signs of rebounding from the pullback in recent years and could grow further in the coming months as the higher costs of many major inputs continue impacting farmers. Persistent pressure from higher production expenses could squeeze profit margins going forward and drive demand for credit higher.
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