Farm lending slows down, again

A pull back in lending strains the farm economy. The Kansas City Federal Reserve breaks down the outlook for ag financing in 2020.

Kansas City Federal Reserve ag economist Nate Kauffman says that farm lending at commercial banks softened again in the second quarter amid the ongoing coronavirus pandemic and a more pessimistic outlook for the ag economy.

According to Kauffman, “We did continue to see a pullback in lending, that’s been a continuation of trend for the past few quarters specifically for non-real estate loans. We’ve continued to see delinquency rates pick up, continue to see other sources information of payment challenges...”

He says that the federal loan programs and other government assistance will help limit the severity of financial stress in farm country in the coming months. However, the longer-term prospects for the ag economy remain cloudy.

“My concern would be more going into next year, even if conditions are, call it, flat for 2020,” Kauffman states. “We could still be looking at a relatively low price environment and more concerns about credit quality going back into 2021.”

On a positive notes, according to Kauffman, despite a more pessimistic environment for farm income and credit conditions, farmland values have remained relatively steady.

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