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Ag sector 'booming,' Fed says
Farm incomes are, in general, surging and sending all other values in the ag sector rocketing higher, according to a report released by the Federal Reserve Bank of Kansas City.
The most notable shift that's taken place, according to Fed economist and Omaha branch executive Jason Henderson, is in loan volume; short-term production loan volume has declined, and those dollars instead are going toward larger, long-term investments.
"Strong farm incomes transformed non-real estate loan portfolios at commercial banks. Rising incomes curbed demand for short-term production loans but fueled capital investment that lifted intermediate-term loans volumes for machinery and equipment," Henderson says in a Fed report. "With softer non-real estate loan demand, more bankers reported a rise in funds available for farm loans. Collateral requirements generally held steady, and interest rates continued to trend down."
Operating loans declined 22% from the previous year, with many ag bankers reporting more farmers are pre-paying for some inputs they've previously financed. At the same time, loans for farm machinery and equipment increased in volume by 73% from the previous year.
"Their average size almost doubled," Henderson adds of the increasing machinery and equipment loans.
It's not just farm-related expenses that are gaining in volume, farmers say. Agriculture.com Farm Business Talk members say they're using extra income now to invest in their machinery and other tools, but it's spilling into other economic sectors in the towns of farm country.
"Besides capital purchases, local appliance, flooring, car dealers and funiture stores report good sales with farmers having more income," says Farm Business member idalivered. "Personally, tile is an ongoing expense. Replaced a planter, but recent changes made me wish I had ordered a bigger one."