Non-real estate farm loans increase by more than 10% for the third consecutive quarter
News release - Federal Reserve Bank of Kansas City
Oct. 20, 2022 - Larger sized operating loans continued to boost farm lending activity. The volume of non-real estate farm loans increased by more than 10% for the third consecutive quarter. Operating loans accounted for nearly all the growth, driven by a nearly 25% increase in the average size of those loans.
Alongside continued growth in lending, interest rates rose sharply and pushed financing expenses to the highest level since 2019.
Strong agricultural prices continued to support the farm economy, but the rapid rise in production expenses could pressure profit margins, and has shown initial signs of pushing demand for financing higher. Prices of most major commodities remained elevated alongside favorable market conditions and supported a positive outlook for farm finances through the end of 2022. Headwinds have intensified in recent months however, as uncertainty about supply and demand for many farm products in the coming year has led to price volatility.
In addition, large portions of the U.S. continued to be heavily impacted by drought which could hinder revenue prospects and has been particularly challenging for cattle producers.