Concern Over Higher Loan Demand and Lower Repayment Rates

(ARLINGTON, VA) Attendees at the recent 95th Annual USDA Agricultural Outlook Forum heard that lower commodity prices and farm income have contributed to higher loan demand and lower repayment rates for banks. According to Cortney Cowley, an Economist with the Federal Reserve Bank of Kansas City, farmland values have remained stable and have supported agricultural credit conditions. At a regional level though, Cowley says stress in agricultural lending has been more likely in areas with a greater share of wheat and cattle production and may be compounded in areas with high concentrations of oil and gas activity due to oil price volatility. Models utilizing farm and bank-level data suggest that reductions in farm working capital or sharp changes in farm and/or family living expenses can significantly affect a farm borrowers ability to repay loans.