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Farm Lending Slows as Interest Rates Rise

Growth in farm lending activity at commercial banks was limited in the first quarter of 2023 as interest rates climbed higher.

The Kansas City Fed says alongside additional increases in the federal funds’ rates, interest rates on farm loans rose sharply. The rapid rise has shifted the range of rates offered to borrowers considerably higher. Non-real estate farm loan volumes decreased about 10 percent from the previous year in the first quarter of 2023, following average growth of 15 percent in 2022. Lending activity was pushed down by fewer new loans and smaller-sized operating loans.

The outlook for farm finances remains favorable alongside elevated commodity prices, but higher interest rates, increased production costs, and drought remain key ongoing concerns. Strong farm income during recent years has bolstered liquidity for many producers and supported historically strong farm loan performance.

Despite higher interest rates, the availability of credit remains strong at agricultural banks.


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