News

More softening of ag lending

Kansas City Federal Reserve ag economist Nate Kauffman says farm lending at commercial banks softened again in the second quarter amid the ongoing coronavirus pandemic and a more pessimistic outlook for the ag economy.

“We did continue to see a pullback in lending—that’s been a continuation of the trend of the past few quarters, specifically for non-real estate loans,” Kauffman says. “And we continue to see delinquency rates pick up—repayment challenges and those sorts of things—that, of course, we want to be aware of going into the fall.”

Kauffman says federal loan programs and other government assistance will likely help limit the severity of financial stress in the coming months. But he says the longer-term prospects for the ag economy remain cloudy.

“My concern would be more going into next year—even if conditions are call it ‘flat’ for 2020—we could still be looking at a relatively low price environment and more concerns about credit quality going into 2021.”

On a positive note, Kauffman says despite a more pessimistic environment for farm income and credit conditions, farmland values remained relatively steady in the first quarter.

The Fed’s Kansas City district—the Tenth District—includes Nebraska, Kansas, western Missouri, Colorado, Oklahoma, New Mexico and Wyoming.

Link to K.C. Fed’s latest ag finance report