K.C. Fed report: Farm lending steady, but risks remain

A new report from the Federal Reserve Bank of Kansas City says ag lending at commercial banks was steady in the second quarter. But risks in the farm sector continued to weigh on loan growth and credit conditions, according to Fed ag economist Nate Kauffman.

“It seems as though both lenders and borrowers have been a little bit more cautious the past year or so, trying to find ways of cutting back,” Kauffman says. “Recognizing that there maybe is a little more risk, just given that prices have been lower and revenue has been lower, even though it’s been a fairly gradual decline in terms of some of the profit margins in the ag economy.”

From an ag lender standpoint, Kauffman says the first half of this year looked similar to 2016, where borrower financials deteriorated, particularly on the crop side.

“So I think there is still some nervousness , both on the lender and borrowers side, as to what that might portend for the next year or so—and, obviously, depending on where crop prices end up.”

The Fed report notes farmland markets have remained relatively strong this year, despite ongoing declines in most areas, and lending connected to farm real estate has continued to rise at a steady pace.

AUDIO: Nate Kauffman

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