At the end of 2025, the outlook for the US farm economy remained subdued alongside weakness in the crop sector, but aggregate farm financial stress remained limited, said Ty Kreitman, economist with the Kansas City Federal Reserve Bank, in a release.
Direct government payments and resilient farm real estate values have eased some of the strain from weak profitability for crop producers and strength in the cattle sector has lifted incomes in many areas, Kreitman said. Demand for farm loans has grown alongside tighter working capital, elevated production costs and a surge in cattle prices.
Market conditions in the crop sector likely will keep profit opportunities narrow in the months ahead, prolonging challenges for growers that have led to steady deterioration in agricultural credit conditions, he said.
Strong demand for operating loans boosted farm lending activity at commercial banks in the fourth quarter of 2025, Kreitman said. According to the National Survey of Terms of Lending to Farmers, the average size of loans for operating expenses during the year reached a record high and pushed up lending volumes.
Farm loan interest rates remained above the average of recent decades but declined for the sixth consecutive quarter, he said. The share of non-real estate loans with a variable rate increased from below average levels and average loan maturities increased.
OPERATING LOANS GROW
Substantial growth in operating loans drove strong demand for farm lending at commercial banks in 2025, Kreitman reported. According to estimates from the survey, the volume of new farm operating loans increased nearly 40% from 2024 in the fourth quarter and grew by an average of more than 20% throughout the year.
While the rise in non-real estate lending during the fourth quarter was attributed to operating expenses, increased feeder livestock lending also contributed to growth in activity throughout most of 2025, he said.
Operating loan volumes increased alongside notable growth in loan sizes, Kreitman said. Adjusting for inflation, the average size of farm operating loans during 2025 was 30% larger than the prior year, following similar growth during 2024.
Loan sizes grew alongside elevated production expenses and pushed operating loan volumes well above the average of the past two decades, he said.
LOAN MATURITIES GROW
As the size of notes grew, maturities for most types of non-real estate farm loans increased in 2025, Kreitman said. The average maturity of farm operating loans during 2025 increased by about three months compared with 2024 and reached record highs in the fourth quarter.
The average maturity on machinery and equipment loans also increased over the past year and hit the highest level since 2021, he said.
INTEREST RATES DECLINE
Farm loan interest rates declined slightly and remained slightly lower for larger loans, Kreitman said. The average rate charged for non-real estate loans dropped about 40 basis points from the previous quarter.
Compared with early 2024, average rates on loans less than $100,000 decreased by about 110 basis points while rates on loans greater than $100,000 were about 150 basis points lower, he said.
The share of variable-rate non-real estate loans increased sharply as interest rates declined, Kreitman said. More than 80% of non-real estate loans had a floating rate during the fourth quarter, a considerable increase from recent quarters.
The share of loans with variable terms has historically declined slightly during periods of higher rates but dropped more notably in 2024 when rates swiftly rose to multi-decade highs.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $241.68 per cwt to $245.15, compared with last week’s range of $236.32 to $242.85 per cwt. FOB dressed steers and heifers went for $376.57 per cwt to $385.73, compared with $369.10 to $380.59.
The USDA choice cutout Wednesday was down $1.63 per cwt at $365.92 while select was down $0.32 at $362.58. The choice/select spread narrowed to $3.34 from $4.65 with 77 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $417.33 per cwt, and 50% beef was $147.49.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $0.98 to $1.12 a bushel over the Mar corn contract, which settled at $4.27 1/2, down $0.01 1/4.
No live cattle delivery intentions were posted Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $374.36 per cwt, up $0.53. This compares with Wednesday’s Mar contract settlement of $367.45, up $2.67.