According to the USDA, rising crop values can result in higher potential income and will likely result in increased real estate loan demand in row crop producing regions. Nonreal estate agricultural loan demand is driven by investment in machinery, equipment, and grain storage facilities. High crop prices and increasing crop production may lead to a rise in operating loans as producers boost production expenses to maximize yields.
Farm business debt is anticipated to stand at about $228.0 billion by the end of 2008, up $8.0 billion from 2007 and a new record for the fourth consecutive year. Real estate debt is expected to rise to $120.8 billion, up 2.8 percent, while nonreal estate debt should be $107.2 billion, up 4.6 percent. Farm real estate debt is expected to account for 53.0 percent of total farm debt in 2008.
Expectations that nonreal estate debt will expand faster than real estate debt are based on reported high levels of demand for short-term financing of machinery, equipment, and storage facilities. Additionally, nonreal estate debt is expected to increase as production increases in response to those crops (corn/soybeans) associated with ethanol production.
Farm mortgage debt is expected to rise about 2.8 percent in 2008. From the beginning of 2003 through the end of 2008, total farm debt is expected to have risen by about $52.8 billion, or more than 30 percent.
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