With federal pandemic aid in their hands, farmers and ranchers borrowed far less money than usual from ag bankers during the opening months of this year for equipment, livestock, and operating expenses, according to a Federal Reserve survey of commercial lenders.
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 …
Government payments have improved the outlook for farm finances, but like the general economy, that outlook remains highly uncertain amid the pandemic, said a Federal Reserve report on Thursday.
Although ag bankers in the Midwest and Plains say the administration's multibillion-dollar trade war payments were a boon to farmers and ranchers, some lenders are still concerned about underlying weaknesses in the sector.
For three decades, the cycle was predictable for agricultural bankers: Farmers would use money from the sale of crops harvested in the fall to pay down their debts during the winter. But this year broke the pattern. Farm debt increased during the first quarter, said the Federal Reserve in a report that pointed to trade disputes and burdensome crop stockpiles as the likely causes.
Agricultural bankers are slowly raising the interest rate on loans to farmers and ranchers, with the largest increases on the short-term operating loans that account for 60 percent of new, non-real estate farm loans at the banks, said the Ag Finance Databook published by the Kansas City Federal Reserve Bank. "Although farm debt also has continued to rise alongside higher rates, the increase in interest expense has remained relatively small."
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.
For the first time since the summer of 2015, farmland values in the Midwest are holding steady, says the Chicago Federal Reserve Bank. In a quarterly survey, agricultural bankers told the regional Fed that they expect land values to remain stable through spring.
Agricultural credit conditions throughout the Tenth Federal Reserve District of western Missouri, Nebraska, Kansas, Oklahoma, Wyoming, Colorado and northern New Mexico continued to deteriorate in the second quarter of 2016, the Federal Reserve Bank of Kansas City reported, and bankers "expect farm income to remain weak in the third quarter."