The top concern facing agricultural lenders going into 2023 is interest rate volatility, according to the 2022 Agricultural Lender Survey report.
The report is produced jointly by the American Bankers Association and Farmer Mac.
Nearly half of respondents ranked interest rate volatility among their top two concerns, up 35.5 percentage points from last year.
While rising rates have helped bolster bank net interest margins, a combination of higher funding costs, fears of weakening loan demand and strong competition is expected to cut into rising yields.
Most lenders reported overall farm profitability increased in the last year. Lenders expect conditions to deteriorate next year, with 52.6% projecting a decline in farm profitability in the next 12 months.
However, this remains well below the 2016-2020 survey average of 82.3%.
Jackson Takach, Chief Economist at Farmer Mac, says, “Looking ahead, ag lenders are keeping a close eye on expenses, as feed, fertilizer, fuel, and other input costs remain elevated.”