Farm debt balances at commercial banks continued to rise in the third quarter, said Kansas City Federal Reserve Economists Cortney Cowley and Ty Kreitman, in a Bank release detailing the results of a survey of banks.
According to the report data, growth in agricultural production loans slowed from earlier in the year but remained strong, Cowley and Kreitman said. Growth in farm debt was broad, but the pace of increase was fastest among lenders with the highest agricultural loan concentrations.
Increases in farm and non-farm loan balances continued to outpace growth in deposits, and liquidity ratios at agricultural banks tightened further, particularly those most concentrated in farm lending, the release said.
However, despite higher debt balances and softening farm financial conditions, delinquency rates on agricultural loans remained low, the economists said.
THE DATA SPEAKS
Total outstanding farm debt grew 4% from a year ago, which was a slightly slower pace than the previous year and quarter, the Bank said. Farm real estate debt slowed to a little less than 2% annual growth, but the slowdown in total farm debt was driven primarily by slower growth in non-real estate farm debt.
Debt for non-real estate purposes, such as operational expenses, livestock and farm equipment, grew more than 7%, which was slower than the previous quarter but still a faster pace than a year ago, the release said.
Total dollar value growth in agricultural loans was the same for banks with the least and most agricultural loan concentrations, the Bank said. However, banks with more than 300% agricultural loans as a share of Tier 1 capital plus allowance for loan losses saw the fastest pace of growth in farm debt, likely because more highly concentrated agricultural banks tend to be smaller.
DELINQUINCY RATES REMAIN LOW
Delinquency rates on farm loans at banks more concentrated in agricultural lending remained stable and less than 1%, the economists reported. At banks with the lowest agricultural loan concentrations, delinquency rates increased by about 50 basis points but remained below previous peaks at just less than 1.5%.
Liquidity at agricultural banks continued to moderate alongside strong loan growth, the survey found. Although growth in deposits continued to increase, and growth in agricultural and non-agricultural loans softened, loan growth continued to outpace growth in deposits, leading to further increases in loan-to-deposit ratios.
Liquidity declined at all banks but was the tightest at the most highly concentrated agricultural banks, which had a median loan-to-deposit ratio of more than 85.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $191.08 per cwt to $193.76, compared with last week’s range of $189.83 to $193.00 per cwt. FOB dressed steers, and heifers went for $297.79 per cwt to $302.69, compared with $292.77 to $303.53.
The USDA choice cutout Thursday was up $4.01 per cwt at $315.24 while select was up $2.37 at $280.48. The choice/select spread widened to $34.76 from $33.12 with 119 loads of fabricated product and 16 loads of trimmings and grinds sold into the spot market.
The USDA-listed weighted average wholesale price for fresh 90% lean beef was $315.80 per cwt, and 50% beef was $87.42.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.26 to $1.43 a bushel over the Mar corn contract and in Kansas were unchanged at $0.15 over Mar. Mar settled at $4.43 1/2, down $0.04 3/4.
No delivery intentions were posted for the Dec live cattle contract Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $263.07 per cwt, up $1.61. This compares with Thursday’s Jan contract settlement of $258.35, down $0.70.