Farm Loan Rates Edging Higher

Interest rates on most types of farm loans continued to move higher.  A Kansas City Fed report says, following modest increases in short-term rates, commercial banks raised interest rates on loans used to finance various farm-sector purchases.  Following a period of historically-low rates, interest rates increased most significantly on loans used to finance operating expenses.  Operating loan interest rates have increased from a low level of 3.5% in 2015 to 4.9% earlier this year.  Interest rates on other types of loans have also increased since 2015 but at a slower rate.

In addition to the steady increase in interest rates, very few loans in the first quarter of this year were made at less than 4% interest. Back in 2015, more than 40% of farm loans that were used to finance non-real estate originated with an interest rate of less than four percent. Back in 2015, only 10% of farm loans carried an interest rate of more than 6%. In the first quarter of this year, only 21% of non-real estate farm loans were originated with an interest rate of less than 4%. About 22% of the loans originated this year had an interest rate of more than 6%.

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