Growth in Operating Loans Boosts Farm Lending

Dan Economy

farm loan

The volume of non-real estate farm debt continued to increase in the fourth quarter of 2018, according to the Federal Reserve’s Agricultural Finance Databook. Total non-real estate farm loans were up nearly eight percent from a year ago, which was the seventh consecutive quarter of annual growth in loan volumes.

In a news release, the Federal Reserve said the increase in farm financing continued to be driven by lending to fund current operating expenses. The volume of operating loans reached a historical high for the fourth quarter, increasing more than $10 billion, or 22 percent year over year. Rounding out a year characterized by lower farm incomes, uncertainties about agricultural trade and the growth of lending volumes, interest rates on agricultural loans trended higher. The combination of increased lending needs and higher interest rates has continued to raise the cost of financing at a modest pace.

However, despite mounting pressure on the farm sector and limited profit opportunities, the value of farm real estate has continued to provide ongoing support for farmers.

Source: National Association of Farm Broadcasters