Farm Loan Volumes Fall 25% as Kansas City Fed Tracks Mixed Signals

Non-real estate farm lending at commercial banks fell about 25% year over year in the third quarter, the Kansas City Federal Reserve reported in October, as average loan sizes declined and the volume of new operating loans dropped for a second consecutive quarter. Ty Kreitman, associate economist at the Omaha branch of the Kansas City Fed, calls the signals mixed: financial stress stays moderate only because federal money and firm land values hold the line.

What does the lending decline mean?

The drop reflects smaller operating loans, particularly at small and midsize lenders, according to the National Survey of Terms of Lending to Farmers. Livestock lending also decreased. Average interest rates on farm loans were relatively stable during the survey period in early August.

Kreitman, who contributes to the Kansas City Fed's Center for Agriculture and the Economy, wrote that the agricultural outlook remained tenuous even as lending activity eased. Crop prices increased notably in recent months. That increase, he noted, has mitigated the recent surge in diesel prices and could improve profit opportunities while slowing deterioration in farm liquidity.

Three additional supports keep stress moderate:

• The Farmer Bridge Assistance Program earlier this year
• Upcoming crop insurance payments
• Strength in the cattle sector

Federal payments top $21 billion

Government support is the largest cushion. The One Big Beautiful Bill Act, passed in July 2025, has provided more than $13 billion to farmers through the Agriculture Risk Coverage and Price Loss Coverage programs. The Trump administration also announced an $8 billion harvest fuel relief program, and ad hoc payments from the Biden and Trump administrations have supported cash flow.

"Those are providing some strength," Kreitman said. "You also have to consider that (financial) strength was built up in those 2020 to 2022 period."

Producers who banked equity in those years remain in a strong position. The picture is harder for beginning operators with less collateral, who Kreitman identifies as the most vulnerable borrowers.

Land values hold the balance sheet

Farmland values have increased only modestly in the past couple of years, while ranchland values have risen, sustaining balance sheets. In the Kansas City Fed's territory — Colorado, Kansas, Nebraska, Oklahoma, Wyoming and parts of Missouri and New Mexico — non-irrigated farmland values have been flat year over year for the past two quarters. Irrigated land values keep growing, but aggregate growth has slowed to less than 5%. Rangeland values rose 5% to 10%, signaling livestock price strength.

Ranchers face their own constraint. A historically small cattle herd has delivered high prices, but drought across key High Plains states has prevented expansion. Crop farmers, meanwhile, continue to absorb elevated input costs.

Not the 1980s

Kreitman often fields comparisons to the farm crisis of the 1980s, the hardest decade since the 1930s by many economists' reckoning. Today's data tell a different story. The sector's debt-to-asset ratio is considerably lower than in that era, interest rates were much higher then, and compounding interest quickly added to losses. Lenders rely less on collateral lending today and restructure loans to meet cash flow needs when customers post losses.

Interest rates have dipped slightly over the past two years, though the Fed, watching inflation, raised rates a quarter percentage point this summer. Rates remain elevated by recent historical standards. That matters for capital spending, equipment purchases and land buys, Kreitman said, and farmers must stay diligent when extending credit lines because higher rates may force them to draw down more equity.

What does this change for 2027 planning?

Considerable commodity volatility and elevated expenses — fuel and fertilizer — are expected to persist for the next six to 12 months, shaping decisions for the 2027 crop year. Strip out the noise, Kreitman said, and global production of major crops keeps breaking records without a demand driver rising at the same pace, leaving an oversupply that biofuels and trade only partly offset.

"If we strip away everything, things are not necessarily supportive of an environment where we're going to have $7 a bushel corn anytime soon," Kreitman said. "I think we have to acknowledge that and understand the economic fundamentals in the crop market and then make our decisions and investment based on that."

The Fed's role, he added, is to provide as objective an opinion as possible as conditions develop "and wish the best for everyone." For now, that objectivity points to modest deterioration, firm land and no quick return to boom-era grain prices.