Agricultural credit conditions deteriorated in the first quarter of 2025, and farm real estate values softened in some regions, according to the Federal Reserve Bank’s Surveys of Agricultural Credit Conditions.
WEAKER CROP PRICES
Economist Ty Kreitman and intern Morgan Mastrianni, authors of the Federal Reserve Bank’s release, said weak crop prices over the past year contributed to lower farm incomes, a decrease in loan repayment rates and an increase in renewals and extensions.
Tighter farm finances also led to growth in loan demand, and lenders reported steady increases in collateral requirements, Kreitman and Mastrianni said. Interest rates on agricultural loans declined slightly but remained relatively high, and farm real estate markets continued to cool in most regions.
COOLER AG CREDIT CONDITIONS
Agricultural credit conditions weakened during the first quarter alongside gradual deterioration in a variety of farm financial metrics, the pair said. Loan renewals and extensions, on average, increased at a pace similar to recent quarters, and farm loan repayment rates declined at a faster pace across all districts.
Indicators of credit conditions weakened as the share of respondents reporting farm incomes lower than a year prior remained similar to last quarter, the Federal Reserve report said.
Demand for farm loans also continued to grow as farm finances tightened, but credit availability was steady, the economists said. Demand for non-real estate loans, on average across all districts, increased at the fastest pace since 2016.
As demand for farm loans grew, availability of funds among agricultural lenders remained unchanged following gradual declines throughout 2024, the Bank said.
As credit conditions weakened and demand for loans increased, more lenders reported tighter credit standards, the economists said. The share of survey respondents reporting an increase in collateral requirements compared with a year ago was the highest in more than a decade across all districts.
The most notable increase in collateral requirements was reported in the St. Louis district, where farm finances for the quarter were weaker than in other regions.
INTEREST RATES DECLINE
Farm loan interest rates continued to decrease from highs reached in 2023 and 2024, the report said. On average across all districts, rates on operating and real estate loans were about 60 basis points less than a year ago.
Farm loan interest rates have declined over the past year alongside lower benchmark rates, they said. However, they remained elevated relative to recent averages.
Agricultural real estate valuations remained strong, but land markets softened in many areas alongside weaker farm finances and relatively high interest rates, the Bank said. Non-irrigated cropland values increased by less than 5% from last year in the Chicago and Minneapolis districts and decreased slightly in the Kansas City district.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $223.72 per cwt to $234.59, compared with last week’s range of $220.00 to $231.49 per cwt. FOB dressed steers, and heifers went for $349.46 per cwt to $359.41, compared with $348.05 to $365.35.
The USDA choice cutout Thursday was up $1.69 per cwt at $366.85 while select was off $0.11 at $356.61. The choice/select spread widened to $10.24 from $8.44 with 70 loads of fabricated product and 28 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $385.56 per cwt, and 50% beef was $135.04.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.15 to $1.25 a bushel over the Jul corn contract, which settled at $4.39 1/2, up $0.00 3/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $304.86 per cwt, up $1.35. This compares with Thursday’s Aug contract settlement of $309.15, up $5.27.