New non-real estate farm lending activity at commercial banks continued to decline in the fourth quarter of 2023. The volume of new non-real estate farm loans in the final months of 2023 was about 15 percent less than the previous year. The number of new loans did increase from the previous year, but the average loan sizes were considerably lower.

The sharp climb in farm loan interest rates abated during the quarter as average rates increased modestly for some types of loans and dropped slightly for others. Despite a reduction in new loans compared to late 2022, 2023’s outstanding farm debt balances reported by commercial banks grew steadily through the third quarter of 2023.

Elevated production costs, higher interest expenses, and lower commodity prices increased the financing needs of many producers. The Kansas City Fed says strong liquidity in recent years likely supplemented the borrowing needs of some operations throughout 2023.