Trends in Farm Lending
- Rising productions costs pushed loan volumes higher from April to June.
- Large bank loan portfolios for land loans have increased from 9 percent to 12 percent.
- Small bank loan portfolios for land loans have increased from 12 percent to 27 percent.
- Loans for input purchases grew 5.3 percent from 2012 to 2013.
- Machinery loans dropped almost a third for the second quarter year over year.
Impact on Farm Debt
- Farm debt increased 3.2 percent at the end of the first quarter, the most since 2009.
- Delinquency rates on non-real estate loans edged down 1.3 percent at the end of the 1st quarter.
- Delinquency rates on real estate loans trended down at lenders of all sizes.
Farmland value trends
- North Dakota’s values for non-irrigated land are climbing the highest, up 39 percent from 2012.
- Annual cropland value gains slowed from record highs in other states, pulling back to 20 percent or less throughout most of the Corn Belt.
- More bankers in the Chicago, Dallas and Richmond Federal Reserve Districts, however, expected farmland values to hold steady in the coming months compared with expectations at the end of 2012.
- In the Kansas City and St. Louis Districts, farm income expectations for 2013 were dampened by an anticipated drop in crop prices later this year if production rebounds from last year’s drought-reduced yields.
- With slack loan demand, ample funds were available for qualified farm borrowers. In fact, most agricultural bankers in the Chicago, Dallas and Richmond Districts classified loan-to-deposit ratios as lower than desired.
- Heated competition for high-quality farm loans pushed interest rates down further for short-term feeder cattle and operating loans, intermediate-term non-real estate loans and long-term real estate loans.
Larger farming operations require more capital, which is better served by larger banks than by local community banks. Land values continue to increase but are slowing down. Higher production costs created more loan demand in the second quarter of the year, but demand for equipment loans tapered off at the end of 2012. While farm debt is increasing, loan delinquencies are not.
Source: FarmGate blog