Federal Reserve Bank of Kansas City Reports that Farm Loan Interest Rates Edged Higher During Q1Fri, 04 May 2018 12:18:14 CDT
Interest rates on farm loans continued to increase in the first quarter of 2018, according to the latest Ag Finance Databook report from the Federal Reserve Bank of Kansas City's Omaha Branch.
Following a prolonged period of historically low rates, interest rates on most types of farm loans at commercial banks have increased between 1.0 and 1.5 percentage points since 2015. Although farm debt also has continued to rise alongside higher rates, the increase in interest expense has remained relatively small.
Additional increases in rates could put more pressure on some farm operations, but delinquency rates on farm loans remained low through 2017, and the performance of most agricultural banks has remained solid.
While, interest rates on farm loans have continued to inch higher, the report concludes that increases have only had a rather modest effect on producersí overall expenses. Despite the modest increase in interest expenses, higher interest rates typically are expected to place downward pressure on farmland values, which may still have a more significant effect on farm finances than interest expenses directly. Farmland values, however, have continued to remain relatively steady and, even in a higher interest rate environment, have provided ongoing stability to farm sector balance sheets and agricultural lending.
Read the complete release, here.
Source - Federal Reserve Bank of Kansas City, Omaha Branch
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