Farm income weakened in much of the Midwest and Plains during the opening months of this year, said reports from regional Federal Reserve banks on Thursday, with ag bankers telling the St. Louis Fed that an adverse trade outcome is clearly the most significant threat to agriculture in 2019. The quarterly reports from the regional Feds were released at the same time that China and the United States were mutually threatening escalation of the Sino-U.S. trade war even while seeking its resolution. On Friday, the United States made good on its threat, raising tariffs on $200 worth of Chinese goods.
“Perhaps not surprisingly, a clear majority — 62 percent of the respondents — indicated that an adverse trade outcome presents the most significant risk to the farm sector this year,” said the St. Louis Fed in its Agricultural Finance Monitor. Placing second among the five options for greatest threat, at 23 percent, was an increase in input prices. “Rising interest rates and declining land prices are generally not seen as significant risks to the farm sector in 2019,” the report said.
Ag bankers surveyed by the St. Louis and Kansas City Feds said farm income weakened during the first quarter of 2019. “Major flooding and blizzards across some regions … may also put additional financial pressure on some farm borrowers as damages continue to be assessed,” said the Kansas City Fed.
Bankers in the central Midwest told the Chicago Federal Reserve that they expect higher demand for non-real-estate loans this spring. “This year could get ugly,” said an Indiana banker. The Chicago Fed said that “2019 could end up being quite a challenging year for the district’s agricultural producers,” considering generally low commodity prices and the cold, wet spring, including flooding along the Upper Mississippi River.
For the St. Louis Fed’s Agricultural Finance Monitor, click here.
To read the Chicago Fed’s AgLetter, click here.
For the Kansas City Fed’s Ag Credit Survey, click here.