Farmers are taking out loans at a rate and scale not seen in years as weakened crop prices weigh on the agricultural sector, according to a report from the Federal Reserve Bank of Kansas City.
The volume of new operating loans increased at its fastest pace since 2017, the report said, with commercial banks issuing 40% more of these loans to farmers over last year. Farmers are not only taking out more loans, but also borrowing higher amounts. For the first time in at least two decades, loans larger than $1 million made up the majority of lending volume.
Growth in loan volumes was concentrated among small and mid-sized lenders, the Federal Reserve report said, underscoring difficulties for family farms and other smaller operations without deep pockets to weather the volatility. Farmers are grappling with weakened global demand and a glut of corn and soybeans, which has contributed to a decline in the prices paid to producers.
(From the National Association of Farm Broadcasters)