Agricultural Lending a Bright Spot for Banks

Rising prices for corn, soybeans and other agricultural commodities are increasing the financing needs of food-related businesses, including meat producers, grain merchants and makers of breakfast cereals, according to bankers.  Overall agriculture loans at banks, thrifts, and credit unions rose 11% in the second quarter from a year earlier, according to SNL Financial. Bankers expect demand for agricultural loans to continue to increase.

Bankers like the loans because agricultural borrowers boast high incomes to fund repayment and the collateral is attractive. Interest rates on agricultural loans are about 2% to 3% over the 30-day London interbank offered rate, which is currently at around 0.2%.