Over the past seven years, the interest expense faced by producers receiving a USDA Farm Service Agency loan increased 50% to 62%, and the total first-year payment increased 72% to -89%.
That was because of increases in interest rates and loan amounts, said Sarah Atkinson of Farmdoc daily. Interest-rate increases can be tied to increases in the Federal Reserve’s target federal funds rate starting in 2021, which tend to cause increases in the prime rate.
And, increases in the average size of farm loans points to an underlying need for larger levels of financing. This likely is driven by the increase in the costs of variable and fixed inputs as well as the steady appreciation of farmland prices over the past decade.
CONGRESSIONAL CHANGES
One often-cited factor for larger loan amounts is the change in the congressionally set limits for FSA farm loan programs. Direct loans had a maximum loan amount limit of $200,000 prior to 2008. The direct loan limit was increased to $300,000 in the 2008 Farm Bill and then increased to $400,000 for direct operating loans and $600,000 for direct farm ownership loans in the 2018 Farm Bill.
The guaranteed loan limit was increased to $1,094,000 in the 2008 Farm Bill. It was then increased to $1,750,000 in the 2018 Farm Bill. It is now adjusted annually according to inflation and was $2,251,000 for Fiscal Year 2025.
While loan limit increases allow larger loans, the data does not support this as a driving factor for increases in average loan sizes over time. Additionally, in most years few producers are constrained by the loan limit. On average less than 5% of the guaranteed loans made in any given year are for the maximum loan amount.
RISING COSTS
One of the most significant driving factors behind the constant increase in average FSA loan amounts likely is the increasing costs of farming inputs, including production inputs, machinery and farmland. According to USDA Economic Research Service Farm Income and Wealth Statistics data, total production expenses increased 25% between 2016 and 2025, with interest expenses increasing 53%, labor expenses increasing 45%, and intermediate production expenses increasing 30%.
Those increases have resulted in greater levels of working capital needed to meet annual production expenses. Many farms rely on short-term financing in the form of operating loans to meet these needs, necessitating an increase in the average size of these loans.
In addition, farmland prices have steadily increased over the past decade. The US average farm real estate value per acre increased 89% between 2011 and 2025, and 39% between 2020 and 2025.
While impressive, those statistics mask the variation in regional price pressure, with cropland prices in California and Northeastern states and pastureland in East-Coast and mid-south reporting higher-than-average land prices. The rise in farmland prices has led to larger farmland loan amounts.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $243.59 per cwt to $252.00, compared with last week’s range of $240.65 to $247.06 per cwt. FOB dressed steers and heifers went for $383.84 per cwt to $389.59, compared with $376.57 to $385.81.
The USDA choice cutout Tuesday was down $3.01 per cwt at $364.76 while select was down $1.01 at $360.22. The choice/select spread narrowed to $4.54 from $6.54 with 105 loads of fabricated product and 15 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $416.59 per cwt, and 50% beef was $154.10.
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 $4.26 1/4, down $0.05 1/2
No live cattle delivery intentions were posted Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $376.07 per cwt, up $0.99. This compares with Tuesday’s Mar contract settlement of $370.97, up $4.82.