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Report: Farm Lending Stabilizing

The Kansas City Federal Reserve Bank reports farm lending has stabilized, but risks remain. The Federal Reserve’s Agricultural Finance Databook shows risks in the sector have remained alongside a persistently weak agricultural economy. The volume of non-real estate farm loans originated in the third quarter this year increased about two percent from the previous year.

The slight increase followed a similar year-over-year increase in the second quarter after sharp declines in lending activity the previous two quarters. Operating loans have continued to account for a rising share of commercial banks’ farm loan portfolio, accounting for nearly 60 percent of the total volume of non-real estate farm loans over the past year.

The report says that risk ratings on new farm loans have increased somewhat, interest rates have edged higher, and the loan-to-deposit ratio, a key measure of bank liquidity, also has increased.

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