Farmers feel less need to borrow money from the bank

The strength of the agricultural economy, fueled by high commodity prices, has reduced farmers’ reliance on agricultural lenders, despite concerns about rising input costs, a Federal Reserve survey finds. with agricultural bankers. “Higher costs are likely to put upward pressure on demand for credit, but strong farm incomes and working capital could also supplement financing for some borrowers,” said one. Federal Reserve Bank of Kansas City Summary Thursday.

Overall, banks advanced a smaller amount of money in non-home loans in the fourth quarter of 2021 than in the same period of 2020, the Kansas City Fed said. The average volume of non-real estate loans over the past 12 months hit a nearly 10-year low, with farm loans driving most of the decline.

Non-housing loans cover a range of expenses, from livestock to farm equipment, and operating loans cover day-to-day costs of crop and animal production. The National Survey of Farm Bankers found that the average non-home loan size, about $83,000, was more than 20% lower in October, November and December 2021 compared to the fourth quarter of 2020. Loans operating expenses, averaging $55,500, were more than 30% smaller.

“Overall, conditions in the farm economy remained strong through 2021 and continued to support farm finances,” the Kansas City Fed said. “Despite growing concerns about rising input costs impacting farmers’ incomes over the coming year, commodity prices have remained high and supported profit opportunities through to the end of the year. end of the year.”

The USDA estimated net farm income, a large measure of profits, at $116.8 billion in 2021, the highest since 2013 and helped by $27 billion in direct federal payments. Analysts expect farm incomes to decline this year due to rising production costs, falling commodity prices and the expiration of pandemic relief programs.

“Overall, the agricultural credit market is following several positive trends through 2022,” the Purdue economists wrote. Brady Brewer and Todd Kuethe in a perspective on agricultural credit this year. Low interest rates and rising land values ​​in 2021 have improved farm balance sheets.

“Over the past several years, there have been high levels of uncertainty in agricultural commodity markets due to the COVID-19 pandemic, policy disputes and supply chain issues,” Brewer and Kuethe. “While these are expected to continue at least for the foreseeable future, the agricultural credit sector does not have as much to worry about.”

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