Farm Debt

Higher income sparked turnarounds in several key farm debt indicators. Survey responses by commercial bankers in the Tenth District Federal Reserve Bank in Kansas City (including Nebraska) showed loan repayment rates increased dramatically through the first three quarters of 2021 (Figure 2-an index above 100 mean a greater number of bankers reported improved repayment rates compared to 2020). The improvement is particularly pronounced when compared to 2015-2019 averages.

Figure 2. Farm Loan Repayment Rates by State

Demand for farm loans were off last year too. Bankers in Nebraska reported loan demand in the first three quarters of 2021 was down compared to 2020 and previous years. And the percent of total farm loan portfolios which fell onto watch and classified lists during the third quarter were down (Figure 3). The watch list are loans which qualify to receive credit but are being closely monitored. The classified list are loans with a defined weakness such as inadequate debt service or insolvent collateral position. Nebraska bankers indicated between 8-12 percent of their farm loan portfolios were on the watch list, down from previous year but the highest share in the District. Nebraska bankers also reported about 3 percent of their loan portfolio was on the classified list, about the same as last year, but down from 2015-2019 when it neared 6 percent.

Figure 3. Problem Loans, Quarter 3