Talk to just about anyone connected to the ag industry today and you will see their face light up when the conversation inevitably turns to commodity prices. After all, higher commodity prices are good for everyone…
Minus one audience: bankers.
Farm lending has been on the slow track for a while now, and that train kept rolling into the first quarter of 2021.
Not exactly welcome news if you’re the one with money to lend.
The Kansas City Federal Reserve Bank found that overall non-real estate farm lending in the first quarter dropped about 10% compared to last year. Within that group, loans to cover operating expenses are down almost 20% year over year, to a level not seen since 2012.
Worth noting: Hefty government aid via pandemic relief likely also contributed to the decrease in lending activity.
The outlook: Most economists seem to agree that commodity prices will remain strong through 2021, but higher input costs could curb overall profits on the farm. And you can bet ag lenders will be watching those income statements closely to see if loan applications will be headed their way anytime soon.