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Producers Borrow More, Need More Time to Repay
Agricultural bankers are lending a markedly larger amount of money to farmers and ranchers, with loan volume up 11% from April, May, and June of last year, said the Federal Reserve on Thursday. It was the highest rate of growth in loan volume in the spring quarter since 2011.
“Despite continued weakness in the farm economy and mounting agricultural stress, farmland values were relatively steady,” said the Fed’s quarterly Ag Finance Databook. While demand for loans rose, so did the length of the loans.
Farm lenders disbursed 50,000 more loans during the just-ended spring quarter than during the same period in 2018. The average amount of a non-real-estate loan was $79,500, an increase of $5,000. Non-real-estate loans are used for such purposes as buying livestock and equipment or paying bills.
Loan durations also increased, said the Fed, to an average of 18.3 months compared with 15.5 months for loans issued during the second quarter of 2018. Ten years ago, the average loan called for repayment in 11 months.
“Bankers also reported additional declines in farm loan repayment rates, a potential leading indicator of past-due loans,” said the Fed. “However, the overall increase in financial stress in agricultural lending has remained relatively modest, and stability in the value of farm real estate has remained an ongoing source of support.”