Liquidity has become the primary concern among agricultural lenders for their producer customers, followed closely by farm income levels, according to the 2023 Agricultural Lender Survey by ABA and Farmer Mac released today during the ABA Agricultural Bankers Conference in Oklahoma City. The survey also found that rising input costs, previously ranked as the top concern in 2021 and 2022, dropped to the third highest this year. Recession risk remained a middling concern for lenders despite worries about an economic slowdown over the coming year.
Interest rate volatility remained the top perceived concern facing lending institutions in 2023, according to the survey. Lender competition along with credit quality were the second and third greatest overall concerns, respectively. At the same time, ag lenders estimate that more than three-quarters of their borrowers will remain profitable in 2023 and two-thirds will remain profitable through 2024. Lenders also expect farm income compression over the next 12 months, with 70% projecting a decline in farm profitability.
Farmland values continued their upward march in 2023. Lenders’ perceptions of farmland values showed an increase of 11%, with some variation across regions, and most lenders expect land values will remain stable over the next year.
Ag lenders reported an increase in demand for both loans secured by farmland and agricultural production loans, and they anticipate that demand for both will increase over the next 12 months. Survey respondents also reported lower ag loan delinquencies and charge-off rates in 2023. However, lenders expect credit quality to deteriorate in the coming 12 months, reverting to historic levels.
