Reports: Farm working capital down, loans to livestock increase
The amount of working capital (current assets minus current liabilities) in the U.S. farm sector has declined since 2012 in a “substantial and alarming” way, although it is impossible to estimate the situation on individual farms, economist Brent Gloy wrote in Agricultural Economic Insights.
Meanwhile, larger livestock loans led to a slight increase in agricultural lending in the second quarter of 2018, the Kansas City Federal Reserve Bank said in an analysis.
In contrast, the Kansas City Fed said, “farm machinery and equipment lending contracted nearly 30 percent, following three consecutive years of increases.”
“Loans to finance farm machinery and equipment make up the smallest category of agricultural loans at commercial banks. Therefore, although the decline in machinery and equipment loans was large, the overall impact on total loan volumes was relatively small.
“In addition, loans to finance current operating expenses, the largest category of farm loans at commercial banks, declined slightly. However, despite declines in other types of loans, the increase in livestock loans was large enough to boost total loan volumes in the second quarter.
“Increased lending on farm operations comes amid increasing risk in the agricultural sector, as expectations of large supplies and trade disputes have contributed to sharp declines in June of prices for most major agricultural commodities,” the bank added.