Ag bankers say farmers are tapping their savings from recent boom years instead of borrowing money at what are the highest interest rates since 2007. The average operating loan issued this past summer was nearly 20 percent smaller than the average a year ago, the lenders said in surveys by regional Federal Reserve banks.
Interest rates doubled in the past year for agricultural loans, the fastest increase since the early 1980s, with the least-profitable farmers feeling the impact the most, said the Minneapolis Federal Reserve Bank. “All producers should prepare for elevated interest rates by incorporating higher interest expenses into cash flow projections regardless of profitability and debt levels,” it said.
With interest rates sharply higher, farmers are increasingly relying on savings or tightening their belts instead of seeking bank loans to cover their expenses, according to ag lenders nationwide. “The outlook for the U.S. farm economy has moderated in recent months as risks of more limited profit opportunities have grown alongside softening in commodity markets and elevated production expenses,” said the Kansas City Federal Reserve Bank.
The Federal Reserve will continue to raise interest rates into 2023, "and the outlook for the coming year grows increasingly gloomy," said agricultural lender CoBank on Monday. The strong dollar "will pressure U.S. exports as the global economy struggles and U.S. goods remain expensive," it said, with warfare in Ukraine injecting additional volatility into world food supplies.
High commodity prices and low interest rates fueled a sharp 15 percent increase in the value of cropland in the Midwest and Plains in the third quarter, according to surveys of ag bankers by four regional Federal Reserve banks. "Alongside prospects for further strength in commodity markets, the outlook for farm finances and agricultural land values through the end of 2021 remained strong," said a summary of the surveys.
Farmers in the Midwest and Plains are reaping a cash bonanza that has dramatically improved their finances a year after the pandemic pummeled commodity markets and prompted a record $46 billion in federal payments to agriculture, said three regional Federal Reserve banks on Thursday. (No paywall)
Farm income and land values surged in the closing months of 2020, lifted by higher commodity prices and large federal payments, according to farm lenders across the Midwest and Plains. With the commodity rally expected to persist, the farm economy was in its best shape in years, said the …
Ag bankers in the Midwest reported the largest year-over-year increase in agricultural land values, 2 percent, since 2014, said the Chicago Federal Reserve on Thursday. The Kansas City Federal Reserve said land values rose by 1 to 3 percent in the Plains, with the value of ranchland and non-irrigated cropland rising the most.
If 2019 was stressful for farmers and ranchers, with low commodity prices and bad weather for crops, the coronavirus crisis is compounding the economic challenges this year, said three Federal Reserve banks in recently released quarterly reports. (No paywall)
Farmland prices are holding steady and agricultural banks are financially strong — potentially two key sources of support for the farm sector during the disruptions of the coronavirus pandemic — said the Federal Reserve in a report on Thursday. (No paywall)
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.
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.”
Agricultural lenders expect farm income, which weakened in the spring, to continue to decline this summer, although a recent rally in corn, soybean, and wheat prices will act as a stabilizer, said Federal Reserve banks in Kansas City, Minneapolis, and St. Louis on Thursday.
Agricultural bankers are lending a markedly larger amount of money to farmers and ranchers, with loan volume up 11 percent from April, May, and June of last year, said the Federal Reserve on Thursday. It was the highest rate of growth in loan volume in the spring quarter since 2011.
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. On Friday, the Trump administration increased the tariffs on $200 billion worth of Chinese goods.
The slump in commodity prices that has accompanied the ongoing tit-for-tat trade war has sapped the farm economy this summer and poses financial risks going into the fall, said Federal Reserve banks in Chicago and Kansas City on Thursday.
Although corn and soybean prices are lower than a year ago, farmland values in the Midwest are up by 1 percent compared to this point a year ago, the first year-over-year gain in three years, said the Chicago Federal Reserve Bank. But land values fell in the central Plains, according to ag bankers surveyed by the Kansas City Fed.