Across the Farm Belt, ag bankers forecast a continued decline in farm income as winter arrives, reported four regional Federal Reserve banks on Thursday. Low commodity prices worry farm lenders, and a Minnesota banker said that the “trade war needs to be resolved to provide stability for customers.”
“Farm income was projected to weaken in coming months,” said the Kansas City Fed in its quarterly Ag Credit Survey. “Farm income was forecast to decline fastest in states with higher concentrations of corn and soybeans.” Tit-for-tat tariffs have shut down U.S. soybean exports to China, and commodity prices fell sharply in midsummer when the trade war started. “Uncertainties surrounding trade” dimmed the outlook for corn, soybean, hog, and dairy producers, said the bank.
Large majorities of bankers surveyed by the Chicago and Kansas City Feds said farmers will be forced to sell assets in the near term to generate cash. “Forced sales or liquidations of farm assets owned by financially distressed farmers were anticipated to increase in the next three to six months relative to a year ago,” said the Chicago Fed’s AgLetter. An Iowa banker emphasized “concern from row-crop farmers regarding interest rate increases next year and low commodity prices.”
“The outlook for the fourth quarter of 2018 was downbeat,” said the Minneapolis Fed, noting “numerous comments about the consequences of tariffs” from the bankers in its survey. The regional Fed said low crop prices and trade woes were taking a financial toll on producers.
Three-fourths of ag bankers told the St. Louis Fed that low commodity prices were their greatest concern. “A majority of agricultural bankers continue to report declines in farm income relative to a year earlier,” said the bank’s Agricultural Finance Monitor. “A slightly larger percentage of respondents reported that they expect farm income and expenditures to decline again in the fourth quarter relative to a year earlier.”
Ag lender Rabobank said in a forecast of 2019 that U.S. farmers will feel financial pain if the Sino-U.S. trade war continues, said the Financial Times. Stefan Vogel, head of agri-commodity markets for Rabobank, said, “The largest threat for farmers is the U.S.-China trade war.” Rabobank said food prices worldwide could be affected by the trade war, the forecast of an El Niño weather pattern that would disrupt crop production, and the risk of the spread of African swine fever. Vogel said it was “difficult to remember a time when there were so many threats to commodity prices on so many fronts.”