Lender surveys from Chicago, Dallas and Kansas City Federal Reserve districts demonstrated another weak quarter as interest rates on agricultural loans declined in the second quarter of 2025. This resulted in the weakest first half of a year since 2023 when rates were as low as 7.14%. On a quarterly basis, interest rates have not been this low since the fourth quarter of 2022. The Minneapolis Federal Reserve District did not have published second-quarter data available at the time of this writing.
Lenders across the agricultural districts expressed reason for the decline in agricultural interest rates as they help paint the broader picture of credit conditions across the regions. Excessive moisture and deteriorating crop commodity markets weighed heavily on producer financials, while livestock producers seemed to be faring better. One lender in Iowa reported, “If the commodity market doesn’t significantly improve, our farmers in this area are going to have a tough time making any profit for the second year in a row.” Another lender in the Dallas district said, “Recent rains have been a blessing and a curse. It’s a blessing for our livestock producers who needed the rain and a mixed bag for our row crops.”
On the plus side, for the first time since 2022, availability of funds increased in the second quarter of 2025 even as demand declined.
For the second quarter of 2025, the average variable interest rate across districts was 7.78%. The average fixed interest rate was better at 7.99%. It is important to note that rates ranged from district to district and by types of loan.
Reviewing quarterly lender surveys in predominantly agricultural districts, average interest rates included (Table 1):
- Chicago: Interest rates on variable-rate operating, intermediate and real estate loans all declined in the second quarter when comparing to the previous quarter. The largest decline was recorded in operating loans with a 0.1% difference.
- Dallas: The average interest rates on both fixed- and variable-rate loans in all categories fell slightly from the last quarter, ranging from a 0.06% difference in all fixed-rate loans to a 0.27% difference in variable-rate intermediate loans.
- Kansas City: Interest rates on fixed and variable loans in all categories were weaker in the second quarter. The smallest interest rate was the variable-rate real estate loan at 7.32%.
FOMC maintains interest rates in July
During the July meeting of the Federal Reserve Board’s Federal Open Market Committee (FOMC) and noted in the meeting’s minutes released Aug. 20, the board voted to maintain interest rates at 4.25%-4.5%. The decision reflects moderated growth of economic activity throughout the first half of the year, a low unemployment rate and strong labor market conditions, all despite somewhat elevated inflation.
The next FOMC meeting is set for Sept. 16-17 and will include a Summary of Economic Projections. Final dates for 2025 meetings include Oct. 28-29 and Dec. 9-10.
