KANSAS CITY, Mo., (NAFB) — The Federal Reserve Bank of Kansas City says farm lending during the fourth quarter of 2016 slowed significantly as lenders and borrowers assessed economic prospects for 2017.

In a report, the Kansas City Fed says some of the reduced loan volume likely stemmed from lower costs of farm inputs. However, as the outlook for farm income has remained weak and farmland values have continued to decline, both lenders and borrowers may be more apprehensive about adding new debt heading into 2017.

A survey of bankers found non-real estate loans in the farm sector dropped 40 percent from a year ago. The 40 percent drop was the largest year-over-year decline in nearly 20 years. Despite the sharp reduction in new loans, outstanding farm sector debt at commercial banks continued to rise, but at a slower pace. Survey data indicated outstanding debt increased five percent from a year ago.

The Fed attributed the increase to a slower rate of loan repayments, but the increase in farm debt was the smallest increase in more than three years.