Fed says farmers need fewer loans

An official with the Kansas City Federal Reserve says banks made about 10% fewer non-real estate farm loans in the first quarter.  Economist and Vice President Nathan Kauffman tells Brownfield that’s because farmers had more income and stronger balance sheets. “The biggest category where we have seen some of the pullback has been in operating loans, but it’s been relatively broad-based. It’s held up a little bit better for things like farm real estate, and that’s actually been a market that’s been maybe even surprisingly strong relative to where things were a year ago at this time.”

Kauffman says the number of real estate and capital improvement loans is only down slightly from a year ago. “I would say that the market, in general, has been pretty strong. Prices are rising. Land values are rising. That’s different than where we had been a year ago or even three to four years ago for that matter.”

And Kauffman tells Brownfield that even with fewer loans being made, the banks are still positioned well to make more loans. “They are flush with liquidity and stand ready to make loans. It’s just been the case that the demand for loans, at least as it relates to agriculture has been down a bit because there has been a substantial rebound.”

Kauffman attributes the economic turnaround to last year when China started placing large orders for crops, commodity prices began to rise, and coronavirus assistance became available to farmers.