Smaller sized loans limited agricultural lending activity at the end of 2021.
The Survey of Terms of Lending to Farmers shows non-real estate agricultural loans at commercial banks decreased by 13 percent in the fourth quarter, and the yearly average was the lowest since 2012. The Kansas City Federal Reserve Bank released the data Wednesday and says the decline was driven by a sharp drop in operating loans and lending at banks with the largest farm loan portfolios.
Despite an increase in the number of all types of loans, the average size of all non-real estate and operating loans was more than 20 percent and 30 percent less than a year ago, respectively. Despite intensifying concerns about rising input costs impacting producer returns, commodity prices remained elevated and supported profit opportunities through the end of the year.
Higher costs are likely to put upward pressure on demand for credit, but strong farm income and working capital could also supplement financing for some borrowers.