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Farm Loan Delinquencies Higher in 2018, But Remain Historically Low
USAgNet - 07/09/2019

After several years of persistently low net farm income, collapsing levels of working capital, and rising debt, there has been growing concern about the overall health of the farm economy. A helpful measure is farm loan delinquency rates, which is published by the Kansas City Federal Reserve Bank.

Two categories of farm loan delinquency data are published, non-real estate and real estate.

At the end of 2018, delinquencies rates for non-real estate farm loans reached 1.84%. After reaching a low of 0.7% in 2014, this measure has trended higher over the last five years. Furthermore, current levels are at the highest levels since 2011.

Considering the data since 1987 provides some helpful perspective. First, current levels (1.84%) remain below the 32-year average (2.26%). Furthermore, current levels are well below the uptick in delinquencies observed in 2009, which peaked at 3.15%. Finally, the delinquencies rate on non-real estate farm loans remains lower than levels experienced during the 1990s and early 2000s. This is all to say that even though the delinquency rate has steadily increased over the last five years, the increase was from historically low levels.

Recently, we have seen many measures of the farm economy focusing only on the last few years of data. These measures often show an unfavorable trend, like the sharp uptick observed in figure 1 since 2014. Often these are misleading as a more extended data series would provide more context and perspective. Consider the conclusions and headlines had figure 1 only included data since 2014.

While a larger share of non-real estate farm loans are classified as delinquent, it's also worth considering the size, or volume, these loans represent (Figure 2). At the low in 2014, delinquency non-real estate farm loans had a collective value of $500 million. This reached more than $1 billion in 2016 but has recently declined. In 2018, the value of these loans were $860 million.

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