Pandemic pummels farm income in Midwest and Plains, say ag lenders
The government’s coronavirus relief programs are an important shield for farmers and ranchers battling a sharp drop in income in the central Plains, ag lenders said in a Kansas City Fed survey released on Thursday. A similar survey of ag bankers in the Midwest by the Chicago Fed “revealed the broad financial distress from the COVID-19 pandemic in rural areas.”
An Illinois banker told the Chicago Fed that the USDA’s coronavirus payments “and other farm programs have contributed to stability in spite of low commodity prices.” The USDA has disbursed $7 billion in cash to farmers and ranchers from the $16 billion earmarked for agriculture.
“Farm income declined in the second quarter at the quickest pace since 2016, and weaknesses in both income and borrower liquidity were expected to carry into the coming months,” said the Kansas City Fed. Nearly 95% of bankers taking part in the Ag Credit Survey said the USDA’s coronavirus aid program was likely to boost farm income. “A majority of banks expected the effect of the direct payment assistance to be ‘moderate’ and about 30% characterized the support as ‘significant.’ ” Looking forward, the regional Fed said that continued economic uncertainty, low commodity prices, and emerging drought in Colorado and Wyoming “could put additional pressure on agricultural economic conditions.”
Ag lenders participating in the Chicago Fed survey “indicated that 97% of their lending areas were at least modestly affected by the pandemic in the first half of 2020 — larger than the reach of extreme weather events in 2019.” A Wisconsin banker said the broad decline in commodity prices “will certainly impact many (farmers) and force some to make tough decisions this fall.”
Farmland values have held steady during the pandemic, according to bankers in the Kansas City and Chicago Fed districts. Most of the bankers expected no change in land values this summer; roughly 20% in each district said they expected values to decline. Almost no one expected an increase.