Agricultural lending declined during the second half of 2019, and while that reflected lower production costs, it “likely also was due to an increase in revenue from government payments (Market Facilitation Program) connected to trade disputes that lingered through the year,” said the Federal Reserve on Thursday.
Despite the dour mood in the agricultural sector, prices for good-quality farmland held steady in 2019, partly because less land than usual was on the market, said Farmers National Co., a farm management and real estate company.
Low commodity prices and high costs are tightening the credit squeeze on the farm sector, with little expectation of improvement in the near term, according to ag bankers in the Midwest and Plains. Some farmers and ranchers will liquidate assets during the winter to stay afloat, and some highly leveraged operators will be forced out of business, they said.
Farmland values are falling for the fifth year in the Midwest, and one factor in the decline is “muted expectations for farm income” this year, said the Chicago Federal Reserve Bank on Thursday. “The profitability of many corn and soybean farms will almost surely fall from their 2018 levels — possibly by a lot for some.”
Farmers are increasingly dour about the outlook for U.S. farm exports, with 27 percent expecting lower soybean prices in the year ahead — nearly double the figure from a month earlier, said a Purdue University poll of 400 producers.
Agricultural bankers reported a 1 percent rise in “good” farmland values in 2017 in a survey by the Chicago Federal Reserve Bank, which said the productivity of midwestern farmland had helped stabilize prices. It was the first increase in values since 2014.
The amount of land used for agriculture in Hawaii has declined 68 percent since 1980, primarily because of the end of pineapple and sugar cultivation, said the Washington Post.
The Kansas City Federal Reserve Bank says the prolonged decline in farm income pushed farmland values lower in the central and northern Plains, "but at a modest pace" of 3 percent for non-irrigated land during the summer. The Chicago Federal Reserve Bank said land values, although relatively stable for the past year, fell 1 percent during the summer.
Farm lending has stabilized in the face of low agricultural profit margins, says a quarterly Federal Reserve report on ag banks. Operating loans, to pay day-to-day expenses, have accounted for nearly 60 percent of non-real-estate loans for the past year, "the highest in the 40 year survey history," says the report of conditions nationwide.