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Smaller Loans Limit Ag Lending, as Ag Economy Remained Strong in 2021 • Farm Policy News

Smaller Loans Limit Ag Lending, as Ag Economy Remained Strong in 2021 • Farm Policy News
Written by Publishing Team

In an update last week from the Federal Reserve Bank of Kansas City, “Small loans limit agricultural lending, “Nathan Kaufman and T. Kreitman stated that”Small loans limited agricultural lending activity at the end of 2021. According to the Lending Conditions Survey for Farmers, Non-real estate agricultural loans in commercial banks up 13% in the fourth quarter The annual average was Lowest level since 2012.

“Small Loans Limit Agricultural Lending” by Nathan Kaufman and Ty Kreitman. Federal Reserve Bank of Kansas City (January 12, 2022).

This decline was driven by a sharp decline in operating and lending loans in banks with the largest agricultural loan portfolios. Despite the increase in the number of all types of loans, the average volume of all non-real estate and operating loans was more than 20% and 30% less than last year, respectively.. Loan volumes decreased significantly with lenders of all sizes, but the number of loans increased significantly with small and medium-sized lenders and decreased in banks with large agricultural portfolios.

“Small Loans Limit Agricultural Lending” by Nathan Kaufman and Ty Kreitman. Federal Reserve Bank of Kansas City (January 12, 2022).

Last week’s update added that,

Overall, conditions in the agricultural economy remained strong until 2021 and continued to support agricultural financing.

Despite the growing concerns about high input costs Impact on producer returns in the coming year, Commodity prices remained high And support profit opportunities until the end of the year. Higher costs are likely to put more pressure on credit demand, But strong farm income and working capital can supplement financing for some borrowers. “

Kaufman and Kreitmann also noted that “The average interest rate charged on non-mortgage loans has also decreasedIt remained at its lowest levels for the largest loans and for the largest agricultural banks. The average interest rate on loans over $100,000 has remained about 140 basis points lower than the small loan rates and is slightly down from the same period in 2019.

“Small Loans Limit Agricultural Lending” by Nathan Kaufman and Ty Kreitman. Federal Reserve Bank of Kansas City (January 12, 2022).

Likewise, the average rate at the largest agricultural banks remained lower than other lenders and also decreased slightly from the same period in 2019.

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