The Kansas City Federal Reserve Bank reports farm lending has stabilized, but risks remain. The Federal Reserve’s Agricultural Finance Databook shows risks in the sector have remained alongside a persistently weak agricultural economy. The volume of non-real estate farm loans originated in the third quarter this year increased about two percent from the previous year.
The slight increase followed a similar year-over-year increase in the second quarter after sharp declines in lending activity the previous two quarters. Operating loans have continued to account for a rising share of commercial banks’ farm loan portfolio, accounting for nearly 60 percent of the total volume of non-real estate farm loans over the past year.
The report says that risk ratings on new farm loans have increased somewhat, interest rates have edged higher, and the loan-to-deposit ratio, a key measure of bank liquidity, also has increased.