Non-real estate farm lending at commercial banks declined slightly in the second quarter, according to an article from the Kansas City Federal Reserve Bank authored by Economists Francisco Scott and Ty Kreitman.
According to the Bank’s National Survey of Terms of Lending to Farmers, the volume of new non-real estate farm loans declined about 5% from the same time a year ago alongside a decrease in lending for most major purposes, the article said.
INTERERST RATES DECLINE SLIGHTLY
Farm loan interest rates decreased slightly but remained relatively high, Scott and Kreitman said. The share of new loans with variable rates remained historically low, and average maturities on most types of loans remained above historical averages.
Conditions in the US agricultural economy remained tenuous as relatively low crop prices continued to limit profit opportunities, the article said. Demand for farm financing increased swiftly over the past year alongside elevated production expenses and reduced liquidity in the sector.
Strong revenues in livestock industries supported farm finances in some regions and distribution of ad-hoc government assistance is likely to provide modest support to some grower, the economists said. Despite easing in the growth of new lending activity in the second quarter, financing needs still could remain high alongside the outlook for continued weakness in crop prices.
NON-REAL ESTATE LENDING GROWTH EASES
Growth in non-real estate farm lending eased during the second quarter, the Bank said. The volume of farm operating loans declined about 2% from the same time a year ago following strong growth that averaged about 25% over the past four quarters.
Feeder livestock loans, which historically have been volatile, also declined considerably during the survey period but grew at an average pace of about 15% over the past four quarters.
Lending pulled back comparatively more at banks with the smallest farm loan portfolios, they said. Loan volumes at small and mid-sized banks fell sharply this quarter, accelerating a downward trend in recent years, while lending at large banks increased 22%, partially reversing a sharp drop in 2024.
The average loan size at large banks also edged higher this quarter, in contrast to smaller loan sizes at small and mid-sized banks, the economists said.
Farm loan interest rates declined slightly but remained relatively high, the article said. The median interest rate on farm operating loans was slightly less than 8% for the second consecutive quarter. The range of rates continued to vary relatively widely—from as high as 9% to as low as 6.5%.
As farm loan interest rates have remained elevated, the share of loans with variable rates has been historically low, they said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $229.17 per cwt to $238.88, compared with last week’s range of $224.82 to $233.02 per cwt. FOB dressed steers, and heifers went for $350.68 per cwt to $378.20, compared with $354.61 to $365.41.
The USDA choice cutout Thursday was up $0.43 per cwt at $373.28 while select was off $4.07 at $353.84. The choice/select spread widened to $19.44 from $14.94 with 112 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $417.84 per cwt, and 50% beef was $254.88.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.30 to $1.45 a bushel over the Sep corn contract, which settled at $4.02, down $0.03 1/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $322.17 per cwt, up $0.26. This compares with Thursday’s Aug contract settlement of $325.00, down $0.57.