Steady demand for operating and feeder livestock loans boosted farm lending at commercial banks in the third quarter. According to the National Survey of Terms of Lending to Farmers, the volume and average size of loans for operating expenses and feeder livestock continued to grow considerably.
Conditions in the U.S. agricultural economy remained disparate as weak crop prices weighed on growers and strong cattle prices boosted profits for many operations, reported Ty Kreitman, an associate economist at the Omaha Branch of the Federal Reserve Bank of Kansas City.
Despite strength in the cattle and other livestock industries, farm financial conditions have deteriorated gradually and weak crop prices moving into harvest could further deplete working capital for many producers, he wrote.
In a related matter, stocks closed lower on Thursday, led by declines in bank stocks on concerns about bad loans.
CNBC reported the Dow Jones Industrial Average fell 301.07 points, or nearly 0.7%; the S&P 500 finished 0.6% lower; and the Nasdaq Composite fell 0.5%. Traders also juggled persistent trade tensions and an ongoing U.S. government shutdown.
Businesses and consumers alike have cited elevated levels of uncertainty around international trade policy in 2025 as the U.S. average effective tariff rate increased from around 2% to 18% as of October.
Demand for farm lending at commercial banks appeared to remain strong in the third quarter of 2025. The volume of new non-real estate farm loans was about 7% higher than a year ago following a slight decline during the previous quarter. Growth during
the third quarter was attributed to an increase in operating and feeder livestock loans.
The volume and size of operating loans continued to grow alongside a steady rise in farm production expenses.
Production costs measured by the index of prices paid by producers were more than 10% higher than a year ago.
At the same time, the average size and volume of operating loans increased at an average pace of about 30% and 20%, respectively.
Feeder livestock lending similarly increased alongside significant strength in cattle prices. The average cattle price was nearly 30% higher than a year ago in the third quarter, Kreitman showed.
At the same time, the average size and volume of operating loans increased at an average pace of about 100% and 50%, respectively.
Interest rates on farm loans declined slightly alongside the recent reduction in the target range of the federal funds rate. During the survey period in early August, the average rate on operating loans decreased about 20 basis points from the previous quarter, Kreitman said. The average rate on feeder livestock loans declined 10 basis points. “As the size of cattle loans has grown dramatically, the risk of those loans has likely increased and rates on those notes have remained relatively higher than other types,” Kreitman said.
Two regional banks fell to their lows of the day Thursday after both alleged fraud. Zions Bancorporation plunged 13% after announcing it will take a $50 million charge in the third quarter on two commercial and industrial loans, and Western Alliance dropped 11%.
The banking industry has been on edge lately since the bankruptcies of two auto industry-related companies that have raised concerns about loose lending practices, especially in the opaque private credit market.
Investment bank Jefferies, which held an investor day on Thursday, plunged 9%.
The firm disclosed exposure to bankrupt auto parts maker First Brands, and its stock has fallen by more than one-fifth since the bankruptcy of First Brands and subprime lender Tricolor. JPMorgan Chase wrote off $170 million in the third quarter related to the Tricolor bankruptcy and announced it was reexamining its controls.
Anxious bankers recalled Silicon Valley Bank’s failure in March 2023, when high interest rates drove paper losses on its bonds, sparking a fatal deposit run that felled Signature Bank days later.