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Small ag banks mitigate the risk of rising demand for farm loans


Successful Farming: In an indirect sign of stress in the farm sector, small agricultural banks are making adjustments, such as syndicating loans and charging higher interest rates, to offset risk in the face of high demand for farm loans, said the Federal Reserve in its quarterly Ag Finance Databook. The Fed’s Beige Book, meanwhile, said spring floods in the northern Plains and western Corn Belt could put an additional burden on a farm sector coping with low commodity prices. “Despite a slight decline in the total number of loans reported by agricultural bankers, farm lending continued to increase in the first quarter of 2019. The growth in loan volumes was due primarily to additional increases in the average size of loans to farmers,” said the Ag Finance Databook. The average loan was $85,510 from January through March, compared with $80,090 during the first three months of 2018. “Alongside larger loans and higher loan volumes, small agricultural banks have made adjustments to meet strong demand from farm borrowers and to mitigate risks associated with lending in a low-income environment.”

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