Growth in farm debt at commercial agricultural banks remained elevated in the first quarter of this year, and loan delinquency rates increased modestly, said a report Tuesday from the Kansas City Federal Reserve Bank.
According to Reports of condition and income, outstanding agricultural loan balances at commercial banks increased 3% from a year ago, said Bank Economists Ty Kreitman and Ayesha Cooray, authors of the report.
At agricultural banks, the increase was almost 7%, boosted by considerable growth in production loans and moderate growth in farmland loans.
According to commercial bank call reports, real estate and non-real estate farm debt at agricultural banks grew about 5% and 9% from a year ago, respectively. At non-agricultural banks, growth in outstanding production loan balances was less pronounced than at agricultural banks and farm real estate debt was nearly unchanged.
The increase in outstanding farm loan balances also was slightly more pronounced at small and mid-sized agricultural banks.
Total farm debt increased by more than 6% from last year among agricultural banks with farm loan portfolios less than $500 million. While the rate of growth was only slightly lower for lenders with the largest portfolios, the smaller portfolios accounted for the majority of additional outstanding balances at agricultural banks.
DELINQUENCY RATES LOW
Farm loan delinquency rates remained historically low but increased slightly for the second straight year. Despite modest deterioration in credit conditions, earnings and capital performance at agricultural banks remained sound.
Demand for financing grew alongside elevated production costs and reduced working capital for many producers.
Agricultural bank liquidity was relatively stable in aggregate and continued to support credit availability, but the share of lenders with tight liquidity positions increased gradually in the first quarter.
Alongside strong loan growth, liquidity was notably tight for a growing share of farm lenders. The aggregated loan-to-deposit ratio across agricultural banks declined in the first quarter of 2025 relative to 2024 but remained close to the 20-year average.
About two thirds of agricultural lenders continued to report loan-to-deposit ratios less than 80%, but the share with ratios above 80% increased relative to a year ago.
OUTLOOK SUBDUED
The outlook for the agricultural economy remained subdued as crop prices remained relatively weak and were expected to continue weighing on farm finances and credit conditions in coming months.
Despite signs of modest deterioration in credit conditions, financial performance at agricultural banks remained sound. The net interest margin, return on average assets and Tier 1 leverage capital ratio at agricultural banks all increased from last year.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $225.63 per cwt to $229.40, compared with last week’s range of $229.67 to $239.21 per cwt. FOB dressed steers, and heifers went for $359.16 per cwt to $365.67, compared with $360.16 to $373.52.
The USDA choice cutout Tuesday was up $0.04 per cwt at $395.60 while select was down $4.04 at $380.06. The choice/select spread widened to $15.54 from $11.46 with 91 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $407.95 per cwt, and 50% beef was $265.71.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.30 to $1.35 a bushel over the Sep corn contract, which settled at $4.06, down $0.03 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $315.07 per cwt, up $1.00. This compares with Tuesday’s Aug contract settlement of $306.02, down $4.65.