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.