Agricultural credit conditions remain weak, but government payments “appear likely to limit the severity of financial stress among farm borrowers in the coming months,” said the Federal Reserve in a quarterly report on Thursday. The Ag Finance Databook said uncertainty “is likely to remain elevated” about the longer-term outlook.
Direct federal payments to agriculture are forecast at a record $33 billion this year. The biggest portion is coming from stopgap programs, such as the $16 billion coronavirus relief program at the USDA, that are expected to expire in coming months. Additional aid to agriculture may be included in a new coronavirus aid bill later this month.
The Federal Reserve report said coronavirus assistance initiatives, such as the Paycheck Protection Program and the Economic Injury Disaster Loan program, “likely supplemented the financing needs of some producers, while direct aid payments may offset declines in farm revenues in 2020.” Farm lending by ag bankers has slowed as the pandemic has spread, said the Databook.
“Despite a more pessimistic environment for farm income and credit conditions, farmland values remained relatively steady in the first quarter” of January through March, said the report. Compared with early 2019, farmland values edged lower in the northern and central Plains and the upper Midwest. They were up 1 to 2 percent in the central Midwest and showed strong gains in Oklahoma and Texas.
The Ag Finance Databook is available here.