The following is from David Oppedahl of the Federal Reserve Bank of Chicago.
Agricultural credit conditions Seventh Federal Reserve District deteriorated relative to a year ago, but agricultural bankers expected to work through the turbulence with most of their farm clients. Repayment rates on non-real-estate farm loans moved lower in the July through September period of 2015 compared with the same period of a year earlier. The index of loan repayment rates slipped to 60 in the third quarter of 2015, as no responding bankers reported higher rates of loan repayment relative to a year ago and 40 percent reported lower rates. The index of loan repayment rates was almost as low as in the first quarter of 2015.
Moreover, loan renewals and extensions on non-real-estate agricultural loans were up sharply in the third quarter of 2015 relative to the same quarter of 2014, with 34 percent of the responding bankers observing more of them and just 1 percent observing fewer. Additionally, at 105, the index of funds availability was only slightly above last quarter's value, which was the lowest in nine years; 14 percent of the survey respondents indicated their banks had more funds available to lend during the third quarter of 2015 than a year earlier and 9 percent indicated their banks had less. Collateral requirements for loans in the third quarter of 2015 tightened relative to the third quarter of 2014.
The pickup in demand for non-real-estate loans compared with a year ago had lasted for two years as of the third quarter of 2015. However, this quarter's reading wasn't as strong as those earlier this year. The index of loan demand dropped to 125, with 42 percent of survey respondents observing higher demand for non-real-estate loans than a year earlier and 17 percent observing lower demand. Even so, additional loan demand contributed to the increase in the district's average loan-to-deposit ratio, to 72.3 percent—its highest level since the third quarter of 2010. As of Oct. 1, 2015, the average interest rates on agricultural loans were 4.82 percent for operating loans, 4.96 percent for feeder cattle loans, and 4.58 percent for farm real estate loans—just shy of their all-time lows, set in the first quarter of 2015.