MINNEAPOLIS, May 13, 2004—Agricultural financial conditions were very strong during the first quarter, especially for soybean and dairy producers and North Dakota farmers overall, according to the Federal Reserve Bank of Minneapolis' first-quarter agricultural credit conditions survey of lenders. Most indicators for growth in the agricultural sector improved, including loan repayment and farm income. Prices for many district agricultural products increased in the first quarter, highlighted by record milk prices and soybean prices of over $10 per bushel, leading some farmers to plant more soybean acres and dairy producers to expand. Lenders expect an increase in farm income and a growing demand for loans in the second quarter. However, drought remains a concern across most of the district.
Rising profits have pushed land values higher. Respondents revealed that nonirrigated farm land and ranchland values increased from a year ago by an average of 15 percent and 14 percent, respectively. South Dakota lenders reported that farmland values increased by 21 percent from a year ago. In Minnesota, lenders saw an average increase in farmland values of 17 percent.
Most lenders expect farm income and capital spending to increase in the second quarter. However, some lenders expressed concerns about the continuing drought, higher input costs and over-valued land prices.
The Federal Reserve Bank of Minneapolis' quarterly survey included 130 agricultural bankers in Montana, North and South Dakota, northwestern Wisconsin and Minnesota. The Upper Peninsula of Michigan is not part of the survey. See complete results.
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.