Tenth District Federal Reserve Farm Loan Survey Reveals Strong Finances
KANSAS CITY, Mo. – An annual banker survey for the first quarter of 2021, District Tenth Federal Reserve District, based in Kanas City, Missouri, indicates strengthening of farm credit conditions.
Conditions rebounded in late 2020 and continue to improve “alongside” further increases in crop prices, the bank said in a report released on May 13, 2021, with information from economists Cortney Cowley, research regional in Oklahoma City and Ty Kreitman. , in Kansas City.
The survey does not include the Ninth District, based at the Federal Reserve Bank of Minneapolis, which includes Minnesota, Montana, North Dakota and South Dakota. This district released a separate report on May 12, 2021. General and Underlying Cropland Conditions Widespread drought threats are similar for both regions.
“Higher profit potential for farm borrowers supported a second straight quarter of significant increases in farm income, loan repayment rates and farmland values,” Cowley and Kreitman wrote.
Cortney Cowley is an economist with the Federal Reserve Bank of Kansas City, based in its branch in Omaha, New York. She spoke on February 17, 2016 at the Northwest Farm Managers Meeting in Fargo. Photo taken February 17, 2016 at the Fargo Holiday Inn. (Mikkel Pates / Agweek)
Improvement in the tenth district occurred for all producers, but more slowly for pastoralists and in areas affected by severe drought. Livestock prices remain at lower levels than they were before the COVID-19 pandemic, but government “support” has helped consolidate farm businesses.
The district includes Nebraska, Kansas, Oklahoma, Wyoming and Colorado as well as northern New Mexico and western Missouri.
Loan repayment – The loan repayment rate was 40% above average, led by Nebraska at around 50%, indicating that loan repayment percentages were increasing. Loan repayment percentages were the highest since 2012, when farmers received high prices for maize and basic commodities after a drought.
Loan request – Loan demand was “weak”, but Nebraska and Kansas reported a slight decline in loan demand. The percentage of bankers reporting a lower application rate was 40% in both states, compared to a five-year average of 10% for the first quarter.
Returned —Two-thirds of the region’s bankers reported higher farm income than a year ago, the highest share since 2011.
Expenses “Bankers say borrower spending ‘grew at a rapid pace’ during the quarter. Farmers spent more on capital goods and households than at any time since 2012. And it was “the first time in eight years that both measures increased in the same quarter.” “The trend is expected to continue in the coming months,” the report said.
Financial condition – On average, 75% of district bankers reported a “significant improvement” in the financial conditions of agricultural borrowers. Kansas and Nebraska showed an 80% to 90% improvement.
Restructuring / Debt – Less restructuring to meet liquidity needs, a figure that declined in 2020 and the previous four years during the quarter. Bankers said fewer borrowers had an increase in deferred debt. Lenders said only 2% of loan applications were turned down due to lack of cash – “a stark contrast to the previous five years.”
Agricultural land values – Interest rates on agricultural loans fell “following historically low levels”. Rates have fallen 1.5 percentage points since the first quarter of 2019. Lower rates have squeezed bank profits. Real estate values rose 8% in the first quarter “the biggest annual increase for the first quarter since 2013”, while ranch values rose “at the fastest rate since 2015”. The values of non-irrigated cropland increased by at least 8% in Kansas, Missouri and Nebraska.
Among the comments of bankers from different districts of the tenth arrondissement:
- “Government payments and P3s have made all the difference in preventing credit deterioration from a combination of drought and pandemic disruption,” – Southeast Colorado.
- “It’s a confusing time,” said a banker from southwestern Kansas. “The drought hit a large area, but the PAFC and various government program payments had a huge impact at the end of the year and rising commodity prices boosted morale. Many producers have started selling commodities at very profitable levels and most cash flow shows a marked improvement. “
- Row crop farmers are to the brim with money from profits and government payments on top of that, but ranchers are the entities that are still struggling, ”- Central Nebraska.