Farm debt at commercial banks continued to ease in the second quarter, said Economists Nathan Kauffman and Ty Kreitman of the Kansas City Federal Reserve Bank in a release.
Agricultural loan balances decreased by 5% from the previous year because of a relatively large decline in production loans, the economists said. Although farm lending increased at some banks, loan balances dropped by more than 10% from a year ago at a relatively large number of banks.
Declines were most substantial among lenders with both the smallest and largest farm loan portfolios and among agricultural banks with high concentrations of farm loans, they said.
The US agricultural economy remained strong through the first half of the year, and farm income was projected to reach an eight-year high in 2021, the report said.
The quick recovery in farm finances from weakness in recent years has contributed to reduced levels of debt at commercial banks and is likely to continue supporting improvements in agricultural loan performance, they said. In addition to stronger farm income and credit conditions, interest rates have remained at historic lows, providing ongoing support to farmland markets.
TOTAL FARM DEBT DOWN
Farm loan balances at commercial banks continued to decline through the first half of the year, according to the economists. Total farm debt decreased toward the historic average on a rolling four-quarter basis in real dollar terms, and the stabilization was driven mostly by a pullback in production loans.
As of the second quarter, farm real estate debt remained about 8% above the average of the past decade, while non-real estate debt was more than 13% less than the average over that same period.
Farm debt declined at a large number of banks, but decreases in real estate debt were less prevalent than declines in non-real estate debt, the economists said. Production loans were less than a year ago at about 70% of non-agricultural banks and nearly 80% of agricultural banks in the second quarter.
In contrast, farm real estate debt was less than a year ago at about 60% of non-agricultural banks and only about 50% of agricultural banks, the report said.
The share of banks with significant declines in outstanding farm debt also was notable, they said. Nearly 40% of non-agricultural banks and 30% of agricultural banks had farm loan balances fall 10% or more from a year ago.
While farm debt was lower at the majority of banks, a sizeable share of banks also had an increase of more than 10%, the Bank said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $122.43 to $127.40 per cwt, compared with last week’s weekly range of $126.96 to $127.03. FOB dressed steers and heifers went for $192.44 to $203.38 per cwt, versus $200.18 to $201.30.
The USDA choice cutout Thursday was down $2.28 per cwt at $332.58, while select was down $1.72 at $296.45. The choice/select spread narrowed to $36.13 from $36.69 with 117 loads of fabricated product and 15 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.75 to $1.95 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.40 over Sep, which settled at $4.96 a bushel, down $0.02 1/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $156.83 per cwt down $0.64. This compares with Thursday’s Sep contract settlement of $155.75 per cwt, down $0.30.