As commodity prices have continued to drop, many producers may face economic losses with less balance sheet resiliency. The economists at Agricultural Economic Insights say recent loan data revealed that farmers utilized more non-real estate debt in early 2024.
In the first quarter of 2024, total non-real estate debt was 14 percent higher than in 2023. AEI says non-real estate loans increased at the fastest rate in five decades. The last time non-farm real estate debt jumped so quickly was in the late 1970s. However, while the 15 percent increase is rare, increases of 10 percent, which are also large, have occurred quite frequently. With margins squeezed, producers are utilizing more non-real estate debt, especially operating loans. AEI says while the upturn is noteworthy, the rise hasn’t pushed overall debt to record levels. Non-real estate debt trended lower between 2019 and 2023. Higher debt levels will contribute to higher interest expenses.