FARGO, N.D. -- Jason Henderson, Omaha branch executive with the Federal Reserve Bank of Kansas City, Mo., says a national survey of agricultural loans shows an increase in loan volume after the first quarter of 2012, led by non-real estate farm loans.
Healthy capital spending and investments boosted lending in the first half of the year, Henderson says, quoting the Federal Reserve System's Agricultural Finance Databook. The survey pointed to additional gains in the second quarter. Commercial banks reported a 1.4 percent increase in total agricultural loan volume in the first quarter. In the first full week of May, the volume of non-real estate farm loans increased 3 percent from last year's levels.
Still, bankers commented that sluggish operating loans contributed to relatively low loan-to-deposit ratios.
Healthy farm income pushed farmland values higher, with states in the Corn Belt and Northern Plains reporting double-digit annual gains in farmland values, Henderson says.
"In terms of the drought, there's been intense competition in the last year -- small bank, large bank and farm credit associations, and other types of nondepository institutions as well," Henderson tells Agweek.
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The report is not forward-looking, but Henderson says the impact of the drought in Oklahoma and other drought states last year caused more extensions and renewals, but loan repayment rates were only slightly lower. "I wouldn't say it was significant," he says.
Henderson doesn't get into policy promotion, but says, "We want people to recognize that crop insurance is the primary risk management strategy farmers use to manage weather and price risk."
Agricultural bank profits strengthened in the first quarter on a national basis. Rising farm loan repayment rates reduced delinquency rates and net charge-offs on agricultural loans, and the average risk rating on agricultural loans declined. For details on the survey, visit www.kansascityfed.org/research/indicatorsdata/agfinance .
