According to a recent report from the Federal Reserve Bank of Kansas City, agricultural debt at commercial banks continued to decline in the first quarter of 2021 and farm loan performance improved.

Farm loan demand remained muted at commercial banks in the first quarter of 2021, according to a report from the Federal Reserve Bank of Kansas City.

The outlook for agricultural credit conditions in the Tenth District improved in the third quarter alongside increases in commodity prices and the announcement of additional government aid.

Farm lending remained muted in the third quarter of 2020 but increased from last year according to the National Survey of Terms of Lending to Farmers. Despite growing 15% from the previous year, total non-real estate loan volumes in the third quarter were below the 20 year trend for that period.

The effects of the COVID-19 pandemic continued to pressure the agricultural economy and weighed on farm finances in the Tenth District. Farm income declined in the second quarter at the quickest pace since 2016, and weaknesses in both income and borrower liquidity were expected to carry into the coming months.

Farm lending slowed alongside the initial effects of the pandemic and a more pessimistic outlook for agricultural economic conditions. The volume of total non-real estate farm loans continued into a yearlong trend of declines during the second quarter of 2020.

Agricultural credit conditions in the Kansas City Fed’s Tenth District deteriorated at a slightly faster pace at the onset of developments related to COVID-19. The survey for the first quarter of 2020, distributed in mid-March, indicated a larger decline in farm income and loan repayment rates than in recent quarters.

The volume of agricultural lending at commercial banks remained elevated but declined for a second consecutive quarter, according to the Federal Reserve Bank of Kansas City’s latest Ag Finance Databook report. Total non-real estate farm loans decreased about 12% in the fourth quarter and declined over consecutive quarters for the first time since early 2017.

Growth in farm lending activity slowed in the third quarter of 2019. Following 9 consecutive quarters of year-over-year growth and a particularly notable increase a year ago, the volume of total non-real estate farm debt declined nearer to the historical third-quarter average. The primary contributor to the slowdown from sharp increases a year ago was a decline in the average size of farm operating loans. Despite a slowdown in the pace of debt accumulation, weaknesses in the sector persisted, continuing to pressure farm cash flows and agricultural credit conditions.

According to the Kansas City Federal Reserve Bank's first quarter 2019 Databook, non-real estate lending continued to increase at a moderate pace in the first 3 months of the year. The volume of non-real estate loans increased 9% from a year ago.