In the fourth quarter of 2020, loans to farmers significantly decreased to a historically low number. According to the National Survey of Terms of Lending to Farmers, farm lending declined at an average pace of 2% throughout 2020.
Why the Decrease?: This could be due to stronger prices for agricultural commodities as well as government payments, since some farmers required less financing by the fourth quarter. Despite the downward trending of the number of loans given out, the average size of the farm loans given out grew.
Those who did receive agricultural loans received historically low interest rates after a decline that began in the second quarter of 2020. Annual interest expenses were nearly 40% lower compared to the beginning of the year.
The improved financial conditions for farmers in the fourth quarter despite a pandemic has been a positive aspect of 2020. As key agriculture commodities including corn, soybeans, and wheat increase in price, the need for farming loans may continue to decrease.
Learn More: Ag Lending Update: Fewer New Loans to Farmers