Contact: Rosie Cataldo 612-204-5261 Date: June 25, 2001 FOR IMMEDIATE RELEASE

Ag Lenders' Guarded Outlook Continues

MINNEAPOLIS—The Ninth District's second quarter survey of agricultural lenders indicates little has changed over the past year: Lenders continue to report a pessimistic outlook for district farmers. Overall farm income as well as household and capital spending are little changed from a year ago. Agricultural producers are repaying loans and extending loans at about the same pace as in second quarter 2000. However, the proportion of farm customers at their debt limit increased slightly in the second quarter, up from both the first quarter 2001 survey and last year's second quarter survey. Meanwhile, interest rates are down from a year ago, while land prices continue to increase.

Findings on farm income and spending:

• About 67 percent of Minnesota lenders indicated below-average farm income in the current period, more than the 53 percent in second quarter last year.
• One-third of Montana lenders reported below-average farm income. One-half of western Wisconsin lenders reported below-average income, an improvement compared with nearly all Wisconsin lenders in the past quarter.
• Overall farm household spending is similar to the previous quarter, with 29 percent reporting below-average household spending in the current period compared to 31 percent last quarter.
• Capital spending remains depressed at nearly the same level as last quarter as 56 percent of respondents indicated below-average capital spending compared with 58 percent last quarter.

Findings on farm loan volumes, land values and interest rates:

• Livestock and other operating loan volumes were about average over the last three months, as 66 percent and 64 percent of lenders, respectively, reported normal load demand.
• Machinery loan and other intermediate-term loan activity was reported to be about average by 56 percent and 66 percent of lenders, respectively.
• Cropland prices increased over last winter's prices from an average of 5 percent in North Dakota to 22 percent in South Dakota.
• Interest rates for farm loans have decreased about 80 basis points from a year ago.

Outlook:

• Below-normal income levels are expected in the next three months by 61 percent of lenders, while only 8 percent predict above-normal income.
• 60 percent of lenders anticipate below-normal capital spending over the next three months.

The Federal Reserve Bank of Minneapolis' quarterly survey of 88 agricultural bankers in the Ninth Federal Reserve District included Montana, North and South Dakota, northwestern Wisconsin and Minnesota. The Upper Peninsula of Michigan is not part of the survey.

As one of the 12 Federal Reserve Banks, the Federal Reserve Bank of Minneapolis contributes to a variety of Federal Reserve System functions, including operation of a nationwide payments system, distribution of the nation’s currency and coin, supervision and regulation of member banks and bank holding companies, and serving as a fiscal agent for the U.S. Treasury. Additionally, the president of the Minneapolis Fed serves as a member of the Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve’s Board of Governors.

State Fact Sheet: Agricultural Credit Conditions Survey

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