More than six of every 10 ag bankers in a Kansas City Federal Reserve Bank survey said that farm income was lower than a year ago and demand for loans was up. “Strong cattle prices have supported profit margins in the cattle sector, but prices for crops have declined faster than production expenses,” said the regional Fed on Tuesday.
“The index of farm income was lower in Kansas, Missouri, and Nebraska, where crops make up a larger share of farm income,” said the Kansas City Fed in its quarterly Ag Credit Survey, covering conditions in April, May, and June. “Loan demand in the district rose sharply alongside elevated costs and recent liquidity depletion.”
Meanwhile, statewide farmland values in Indiana are at a record high this year, said Purdue University in its annual survey of land values. Top-quality farmland was worth an average of $14,392 an acre, up 4.8 percent from June 2023. The farm managers, appraisers, land brokers, loan officers, farmers, and USDA county office directors who took part in the survey said most of the increase in land values had occurred in 2023, with prices retreating a bit this year. “Respondents generally expect farmland prices to decline modestly through the remainder of 2024,” said Purdue.
Four out of five ag bankers in the Kansas City Fed survey said they expected land values in the central Plains to be unchanged this summer due to high interest rates and a “general moderation” in the farm economy. Cropland values were less than 5 percent higher than a year ago, and ranchland values were up 6 percent.
Loan demand “rose sharply alongside elevated costs and recent liquidity depletion,” said the Kansas City bank. “Demand for non-real estate loans rose at the fastest rate since 2016, with nearly 45 percent of lenders reporting that demand was higher than a year ago.”
“Lower grain prices and continued drought are causing stress,” said a Kansas banker. A Nebraska ag banker told the Kansas City Fed, “Inflation is keeping household spending high, liquidity took a hit, and we have seen some refinancing needed against land, but land prices are still high even with higher interest rates.”