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Winners & losers in new Fed ag data

Jeff Caldwell 11/16/2012 @ 2:13pm Multimedia Editor for Agriculture.com and Successful Farming magazine.

There's more proof that the 2012 drought took a chunk out of some farm income potential, this time in new information that shows farm lending rose in the 3rd quarter of this year in the nation's midsection despite what for many wheat farmers was a year of fairly strong returns.

First, the bad news: While the effect was fairly consistent across most sectors of the region's ag economy, the livestock side felt the most profound pain, according to a report released Thursday by officials at the Federal Reserve Bank of Kansas City.

"Livestock incomes fell more sharply than crop incomes as surging feed prices and rapidly

deteriorating pastures raised production costs," says Jason Henderson, Federal Reserve Omaha Branch Executive. "Farm incomes plummeted for cattle feedlot operators, but ranchers and hog producers also faced significant income declines."

Fed data shows cattle feeders saw the greatest discrepancy between farm loan demand and income, with income falling to below 40% of normal, while loan demand surged to above 110% of normal. Cow/calf producers and hog farmers saw similarly wide discrepancies between the 2, while corn and soybean farmers fared slightly better, though incomes still sunk below 100%. Wheat farmers ended the 3rd quarter in the best shape, with incomes surging beyond 120% of normal, with loan demand just slightly above normal.

"Bankers reported lower incomes from corn and soybean production, primarily in nonirrigated areas," Henderson says. "Wheat incomes, however, were higher due to a solid harvest that preceded the drought and a subsequent run-up in wheat prices after the onset of the drought."

That wheat profitability is the bright spot in Thursday's data that also show a bullish outlook for farmland values in Kansas, Missouri and Nebraska especially, Henderson says. Overall, irrigated land saw a 25% value gain in Kansas over the same time a year ago, while nonirrigated acres in Nebraska saw just over a 30% gain. And, Kansas led the way in ranchland values; the state's pasture saw a value gain of just shy of 17.5%. Though these gains didn't quite touch the record and near-record spikes of the last couple of years, it still shows the trend in higher land prices is far from turning.

"The drought did not appear to have significant impact on farmland markets in the third quarter. Farmland values rose further during harvest, though gains were more modest compared with the surge seen during the past 2 years. District cropland values moved nearly 3% higher in the third quarter and ranchland values edged up around 2%," Henderson says.

"Drought conditions had little effect on the demand for farmland, and bankers expected sales to remain solid even with a seasonal upswing in the number of farms for sale after harvest."

   

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