From staff reports American farmers saw their debt grow in early 2025, with more of them falling a little behind on their loan payments, according to the Federal Reserve’s latest Agriculture Finance Report.
Released in late June, the report showed that the total amount of loans at regular commercial banks increased 3% compared to the same time last year.
For banks that mostly focus on lending to farmers, this increase was almost 7%. The bigger jump was mainly because farmers borrowed more for planting crops and buying farmland. For example, real estate loans at these “ag banks” grew by about 5%, and loans for things such as production supplies went up about 9%.
Even though more farmers are missing payments, the Federal Reserve reported that the overall number of late loans is still low. However, this is the second consecutive year for a small rise in overdue payments.
As seed, fertilizer and fuel remain expensive, farmers are borrowing more due to high operational costs while having less cash on hand, the report showed. Most ag banks still have funds to lend, but lenders are beginning to feel a pinch.
The Federal Reserve found that banks where farm loans are more than 300% of their money available saw the biggest increase in farm debt, jumping over 8%. Smaller and medium- sized farm banks, which have less than $500 million in farm loans, were responsible
for a large part of this loan growth.
Despite these signs of stress, ag banks, as a whole, are still in good financial shape, the research found.
Important measures like profit from interest and overall financial strength improved banks in comparison to last year; however, profit from interest earnings is still lower than what it usually has been, over a longer period.
With crop prices remaining low and farming costs staying high, farmers and lenders alike might continue to feel the pressure in coming months.