Increased livestock loan demand boosted commercial bank ag lending during the third quarter, according to Kansas City Fed economists Nathan Kauffman and Ty Kreitman.
That growth included a 20-percent increase in finance feeder livestock loans and a more than 50-percent spike in other livestock loans. The average size of other livestock loans increased approximately 30 percent in the third quarter, reaching a record high.
Operating loan demand was lower, and total non-real estate lending remained near its decade-long average, 8 percent higher than a year ago but still consistently declining 2 percent over each of the previous four quarters. Interest rates remained at record lows, and loan durations were higher than recent averages.
The U.S. ag economy remained strong, the economists said, as elevated commodity prices continued supporting farm incomes. The prices of most major crops were at multi-year highs as fall harvest approached. Poultry and livestock non-feeder loan volumes were nearly double the inflation-adjusted average from 2010-19, the report stated, and feeder livestock loans were also slightly more than the recent average.
“Weakness in the cattle industry persisted, however, as low cattle prices continued to limit profit margins for producers,” Kauffman and Kreitman wrote. “In addition, concerns about drought and higher input costs continued to intensify and likely contributed to an increase in producers’ financing needs in the livestock sector.”