Agricultural Banks Remain Financially Strong, Farm Loans Declining

KANSAS CITY, MO – Agricultural loan balances at commercial banks reached a five-year low in the fourth quarter and continued to shift toward farm real estate. Although the accumulation of farm debt remained higher than the average of the past ten years, the total value of farm loan portfolios fell 5 percent from the previous year. According to the Kansas City Federal Reserve, loans to purchase farmland accounted for 57 percent of total loan volumes, which was the highest allocation for real estate loans on record. In addition, total farm debt decreased at the fastest pace since the 1980s, with continued declines in both farm real estate and production loans. Although the decline in loans to finance farm real estate remained small, it was the first time farmland loans decreased for three consecutive quarters since 1981. Agricultural banks remained financially strong, despite a historically low net interest margin though moving forward, the pace of lending to farmers may remain slower than in previous years, as 2020 government payments and recent strength in crop prices have improved borrower liquidity and farm balance sheets.
(SOURCE: All Ag News)