Building on a sharp increase in loan volumes in the first quarter of 2014, commercial bank lending to the agricultural sector continued to climb amid a more intense need for short-term financing of production expenses, according to the Federal Reserve System's Agricultural Finance Databook.
In the second quarter, record high prices for feeder livestock boosted lending to the livestock sector but loan repayment rates should be bolstered by improved profitability for cattle and hog producers.
In contrast, narrower profit margins for crop farmers have prompted additional borrowing to pay for operating costs. Although crop insurance may offer a measure of revenue protection in 2014, a prolonged period of low crop prices could raise concerns about increased leverage and available working capital. In addition, loan growth for purchases of farm real estate appeared to ease in the second quarter and farmland markets cooled, particularly in the Corn Belt.
See the complete issue of the Agricultural Finance Databook here for additional information on national trends in farm lending.