The volume of loans to US farmers declined by 19% in the third quarter of this year but remain elevated by historical standards, according to a report by the Federal Reserve Bank of Kansas.
Harvest in Maryland, USA. Photo: Gary Cameron/Reuters.
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Although both the number and value of loans were down by 10% from last year, they are still 1% higher than the average for years 2010-2013.
Loans for operating expenses comprise 70% of all non-estate farm loans and nearly 60% of total loan volume.
The decline in lending may be a result of lower input costs. In August, the US Department of Agriculture forecast a 3% decrease in production expenses from the previous year. Cattle and hogs rearing costs both declined by 21% and 11% respectively in August.
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Additional risk
Lenders also responded negatively to lower profit margins in the agricultural sector. The share of loans with an interest rate of less than 4% declined from 43% to 37%, but loans with variable rate went above 85% for only the second time since 1977.
The higher interest rates with more variable loans and longer maturities may indicate that banks have taken steps to adjust loan terms in response to additional risk in agricultural lending.
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Title: US farm lending declines
The volume of loans to US farmers declined by 19% in the third quarter of this year but remain elevated by historical standards, according to a report by the Federal Reserve Bank of Kansas.
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Although both the number and value of loans were down by 10% from last year, they are still 1% higher than the average for years 2010-2013.
Loans for operating expenses comprise 70% of all non-estate farm loans and nearly 60% of total loan volume.
The decline in lending may be a result of lower input costs. In August, the US Department of Agriculture forecast a 3% decrease in production expenses from the previous year. Cattle and hogs rearing costs both declined by 21% and 11% respectively in August.
Additional risk
Lenders also responded negatively to lower profit margins in the agricultural sector. The share of loans with an interest rate of less than 4% declined from 43% to 37%, but loans with variable rate went above 85% for only the second time since 1977.
The higher interest rates with more variable loans and longer maturities may indicate that banks have taken steps to adjust loan terms in response to additional risk in agricultural lending.
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