Ag Lending and Interest Expense Increasing for Farmers
Farm lending at commercial banks increased during the fourth quarter of last year. Demand for all types of loans, except for farm machinery and livestock, increased significantly over 2016.
Operating expenses continue to make up the majority of loan originations. Loans for livestock made up over a quarter of all new non-real estate loans. The total value of operating and livestock loans increased almost 50 percent over the previous year, but they’re still below 2014 and 2015 levels. Large loans continue to make up the majority of farm loan volumes at commercial banks. Because of high production costs, loans of $100,000 or more continue to make up more than 70 percent of loan volume.
After declining through 2016, the average size of farm loans grew in every quarter of 2017. Interest rates on all types of farm loans increased in the fourth quarter of last year. Total farm debt increased in the third quarter of 2017 from the previous year. The slight jump is due to both real estate and non-real estate debt. Delinquency rates are still low for both real estate and non-real estate loans, staying near two percent in the third quarter of last year.
Source: NAFB News