Crop farmers are seeing much lower incomes this year, down by an average 25 percent in the Plains, according to agricultural bankers in the Farm Belt. The bankers expect to make more loans to help farmers cover expenses and for land prices to soften in coming months, say newsletters from Federal Reserve banks in Chicago and Kansas City. By contrast, income for livestock producers is on the rise, aided by lower feed costs.
“Farm income in 2014 has fallen short of previous years and has boosted the need for financing to cover production expenses,” said the Kansas City Fed. Even with record crops, “85 percent of bankers expected crop incomes in 2014 to be lower than last year and the average decline in income was projected at about 25 percent,” it said. “Furthermore, futures markets suggested prices may remain low, which could adversely affect 2015 profit margins in addition to next year’s level of revenue protection from crop insurance.”
The Chicago Fed said the consensus among bankers in its survey was “crop farmers faced dire prospects for net earnings this fall and winter relative to the previous fall and winter…92 percent anticipated these earnings to fall.” Bankers said they expect loan repayment rates to fall. “In addition, forced sales or liquidations of farm assets among financially stressed farmers were expected to increase in the next three to six months, relative to a year earlier, especially in Illinois and Iowa.”
For the first time since 1998, a majority of bankers surveyed by the Chicago Fed said they expected farmland prices to fall in the upcoming quarter. Farmland prices fell by 2 percent from July-September and equaled the same level as one year earlier. In the Kansas City district, farmland values “declined modestly” during the summer and were barely above the year-earlier figure. One-third of bankers expected cropland values in the Plains to decline further.
“Looking ahead, some bankers were concerned that persistent low crop prices may place further stress on profit margins and cash flow for crop producers in 2015,” concluded the Kansas City Fed.