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U.S. Bankers Say Lower Ag Income Pressures Farm Finances
By P.J. Huffstutter
CHICAGO, Nov 15 (Reuters) - Farm incomes and agrarian credit conditions continued to erode in the third quarter of 2018, as economic pressure from the U.S.-China trade war has bankers seeing loan repayment rates fall, according to separate reports released on Thursday by the Federal Reserve Banks of Kansas City and St. Louis.
Expectations for farm income and loan repayment rates were particularly low for areas and operations more concentrated in soybean, corn, hog, and dairy production as uncertainties surrounding trade continued, according to the banks’ latest reports on the agricultural economy.
The Kansas City Fed surveyed bankers for its report in the Tenth Federal Reserve District, which includes all or parts of Colorado, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, and Wyoming. The St. Louis Fed surveyed bankers in the Eighth Federal Reserve District, which includes all or parts of Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri, and Tennessee.
Alongside lower loan repayment rates, farmers’ working capital deteriorated moderately while bankers’ loan portfolios in crop-producing states showed slightly higher levels of risk, the reports found.
Although farmland values remained stable – or improved slightly in some areas – increasing stress in the farm sector could put downward pressure on farm real estate values moving forward, according to bankers.
One key concern for bankers: How much farmland could come up for sale within the coming months, and whether that could negatively impact prices.
Nearly 85% of bankers surveyed by the Kansas City Fed reported that farm borrowers plan to sell mid- to long-term assets before year’s end to improve working capital or make loan payments, up from about 75% a year ago.
More than 80% of responding bankers in Missouri and 60% of bankers in Nebraska reported lower income – states where the halt of soybean exports due to the U.S.-China trade war is being felt keenly: Soybeans there comprise 27% and 15% of farm revenues, respectively, according to the report.
To read the Kansas City Fed report: https://bit.ly/2DG8XuM
To read the St. Louis Fed report: https://bit.ly/2FnvBcX (Reporting By P.J. Huffstutter in Chicago; editing by David Gregorio)
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