Commercial banks reported a decline in farm lending activity during the second quarter of 2026, a survey of banks by the Federal Reserve Bank of Kansas City.
According to the Survey of Terms of Lending to Farmers, new loan originations declined for nearly all non-real estate loan purposes, Federal Reserve Economist Francisco Scott said in a Bank release.
LOAN VOLUME DECLINES
Loan volumes declined alongside smaller loan sizes at banks with larger farm portfolios, and smaller loan sizes for operating expenses and non-feeder livestock, Scott said. Meanwhile, farm loan interest rates remained stable across loan sizes compared with the previous quarter, although rates continued to exceed historical norms.
Energy and fertilizer prices fell by the end of May and reduced operating costs for some US farmers, he said.
However, crop farmers’ profit margins remained tight as domestic agricultural prices also declined alongside reduced oil prices, Scott said. Providing ongoing support to the agricultural economy, cattle prices remained high in the second quarter and real estate values remained near record highs in key agricultural regions.
TERMS OF LENDING
Non-real estate agricultural loan volumes at commercial banks contracted from the previous quarter and were slightly lower than averages of recent years, he said. The effects of seasonality led to a pronounced decline in the volume of non-real estate loans from the previous quarter and a more moderate decline of 10% from the averages of the last two years.
Lending volumes declined for most loan purposes, with the exception of farm machinery and equipment loans, which increased by more than 50% from recent years, Scott said.
Across banks, average loan sizes returned to second-quarter 2024 levels, but the adjustment varied by loan type, he said. Banks with small or mid-sized farm loan portfolios increased loan sizes by more than 30% from a year ago, nearing 2024 levels but exceeding historical averages.
In contrast, loan sizes at commercial banks with large farm loan portfolios declined by 20% from last year to levels below historical averages, Scott said. Loans used to finance feeder livestock and operating expenses remained above historical levels, while the loans for other purposes were more subdued.
Interest rates remained mostly stable during the second quarter of 2026, he said. The average rate on loans greater than $100,000 was slightly less than 7%, and nearly unchanged from the previous quarter. Average rates on loans of smaller sizes remained slightly above 7% and were similar to previous quarters.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $231.63 per cwt to $237.92, compared with last week’s range of $238.00 to $252.00 per cwt. FOB dressed steers and heifers went for $364.11 per cwt to $377.75, compared with $373.89 to $388.86.
The USDA choice cutout Wednesday was down $2.43 per cwt at $363.43 while select was down $1. at $342.41. The choice/select spread narrowed to $21.02, from $22.34 with 102 loads of fabricated product and 35 loads of trimmings and grinds sold into the spot market.
The USDA-listed the daily weighted average wholesale price for fresh 90% lean beef as $456.58 per cwt, and 50% beef was $157.07.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.18 to $1.33 a bushel over the Sep corn contract, which settled at $4.48 1/2 a bushel, down $0.10.
The CME Feeder Cattle Index for the seven days ended Tuesday was $347.91 per cwt, down $0.56. This compares with Wednesday’s Aug contract settlement of $344.70 per cwt, up $1.62.