2020 Government Payments Led to Improved Farmer Profitability

OMAHA, NE – Farm loan demand remained muted at commercial banks in the first quarter of 2021. That’s according to a Kansas City Federal Reserve report outlining how a reduction in the volume of operating loans led to an overall decline in total non-real estate lending. Financing activity also declined more notably at banks with relatively large farm loan portfolios, while lending was more stable among small and mid-size lenders. Substantial government aid through various programs in 2020 provided financial support, which may have mitigated some producers’ financing needs toward the end of the year. In addition, the Small Business Administration’s Paycheck Protection Program accounted for a sizable share of loans reported, and likely displaced a portion of typical financing needs for some borrowers. Despite some ongoing challenges for cattle producers, financial conditions in agriculture remained favorable alongside strength in other major agricultural commodity markets. The outlook for the sector in 2021 remained significantly improved from recent years, but rising input costs could also weigh on profit margins in the months ahead.
(SOURCE: All Ag News)