“Demand for agricultural credit remained high and loan volumes continued to increase in the first quarter of 2019. To meet growing demand for financing, lenders, especially small, agricultural banks, increasingly have used loan participations and Farm Service Agency loan guarantees,” according to the Kansas City Federal Reserve Bank's first quarter 2019 Databook. “Despite ongoing demand for farm loans and adjustments to lending portfolios, delinquency rates on farm loans have remained low. Interest rates on farm loans continued to rise, but farm real estate values remained relatively steady through the end of 2018.”
Co-authors of the report, Cortney Cowley and Ty Kreitman, the National Survey of Terms of Lending to Farmers, say that non-real estate lending continued to increase at a moderate pace in the first 3 months of the year. The volume of non-real estate loans increased 9% from a year ago. “Although the volume of loans to finance operating expenses remained relatively steady, volumes for livestock loans and loans to finance machinery and equipment increased. The increase in livestock lending likely was due, in part, to slightly higher prices for livestock. In addition, volumes for other loans increased notably due to an uptick in both the size and number of loans.”
As agricultural lending activity continued to increase, interest rates on non-real estate farm loans also edged higher. Furthermore, interest rates on non-real estate farm loans at banks with large farm loan portfolios increased at a faster pace in the first quarter than interest rates at banks with small or midsized farm loan portfolios. On average, interest rates remained lower at banks with large farm loan portfolios. However, interest rates increased 80 basis points at banks with large farm-loan portfolios, while interest rates increased just 37 basis points at banks with smaller farm loan portfolios.