Amid elevated production costs, commodity price volatility and a return to pre-pandemic levels of direct government payments, agricultural loan demand increased in 2023 and agricultural lending by U.S. farm banks grew 6.7% to $110.0 billion, according to the American Bankers Association’s annual Farm Bank Performance Report released today.
The report—an analysis by ABA’s economic research team based on FDIC and U.S. Department of Agriculture data—also shows that farm banks are a major source of credit to small farmers. At the end of 2023, they held 639,694 small-farm loans worth more than $44.6 billion, including $9.2 billion in micro-farm loans at the end of 2023. A small-farm loan is a loan with an original value of $500,000 or less, and a micro-farm loan is a loan with an original value of $100,000 or less.
In 2023, 98.1% of farm banks were profitable, with 53.5% reporting an increase in earnings. Credit quality at farm banks remained strong in 2023, according to the report. Coming off of historically low delinquency rates, the median noncurrent rate at farm banks (loans 90 days or more past due and loans in nonaccrual status) edged up by just three basis points to 0.23%. By comparison, the noncurrent loan ratio for the broader banking sector was 0.27%.
“Farm banks continued to enjoy solid performance in 2023, with robust loan growth and historically low delinquency rates,” ABA Chief Economist Sayee Srinivasan said. “Moving forward in 2024, the agricultural sector will continue to face challenges due to monetary policy actions targeting persistent inflation in the U.S., as well as reduced federal support. Nevertheless, farm banks maintained their strong asset quality and consistent growth in high-quality capital, and they remain well-positioned to continue serving the needs of their customers and communities.”
