Operating Loans Drive Recent Increases in Farm LendingWed, 30 Apr 2014 11:26:10 CDT
Farm loan volumes at commercial banks rose dramatically in the first quarter of 2014, driven by increased demand for short-term production loans, according to the Federal Reserve Systemís Agricultural Finance Databook.
Agricultural producers borrowed larger amounts compared with last year to cover current operating expenses. Lower crop prices reduced cash flow for farmers selling the remainder of last yearís crops and overall crop input costs remained high despite a moderate decline in fertilizer prices.
Feeder livestock loan volumes also rose as low inventories pushed feeder cattle and hog prices higher. In contrast, farm capital spending slowed further, lessening the need for intermediate-term farm machinery and equipment financing.
Small and midsize banks added loans faster than their larger competitors under differing terms. The majority of loans at large banks featured a floating interest rate, while customers of small and midsize banks locked in more fixed-rate loans compared with last year.
The Agricultural Finance Databook is a quarterly compilation of national and regional agricultural finance data. The complete release is available at www.kansascityfed.org/research/indicatorsdata/agfinance.
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