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Ag Banks Make Adjustments as Lending Remains Elevated

Demand for agricultural credit remained high and loan volumes continued to increase in the first quarter of 2019, according to the Federal Reserve's Agricultural Finance Databook.

 

To meet growing demand for financing, lenders, especially small, agricultural banks, increasingly have used loan participations and Farm Service Agency loan guarantees. Increased levels of loan guarantees and participations at small, agricultural banks relative to all banks could be an indication of elevated financial stress in the farm sector.

 

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. As weaknesses in the overall farm economy have persisted, risks to the outlook for farmland include slightly higher interest rates and underlying supply and demand fundamentals of farm real estate markets.