Farm income, household spending and capital investment

A lender in a very dry area of South Dakota captured the financial situation of many district farmers well. “Drought will affect yield, but prices will offset some of those lower yields,” the lender commented. “Crop insurance proceeds will definitely be the savior this year.”

Three of five district lenders surveyed reported that farm incomes increased in the third quarter of 2012 from the previous quarter, and only 5 percent said that incomes decreased (see chart). Minnesota experienced the most widespread increase in income in the district, with 76 percent of respondents reporting higher farm income. Household and capital spending within the district also increased, with 95 percent of lenders reporting increases in or steady levels of household spending and almost 90 percent reporting unchanged or higher capital spending.

Lenders in South Dakota and Montana, which were struck harder by drought, were less optimistic than lenders in other states. Even so, only 16 percent of lenders surveyed in South Dakota and 11 percent of Montana lenders saw decreases in farm income, while 44 percent in each state reported increases. Looking forward to the fourth quarter, however, more than a third of South Dakota lenders expect incomes to decrease.

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Loan repayments and renewals

Agricultural producers in the district are maintaining their rate of loan repayments, and renewals are similarly holding steady. Loan repayments were unchanged for two-thirds of respondents, while 31 percent reported higher repayment rates. A majority of lenders, 79 percent, stated that the number of renewals has held steady, and 15 percent reported a lower number of renewals.

Demand for loans, require collateral and interest rates

Farm households remain flush with cash, and their demand for loans correspondingly fell slightly from the last survey. Almost 52 percent of lenders experienced no change in loan demand, and 30 percent indicated that loan demand has decreased. The amount of required collateral remained flat, with 91 percent of respondents reporting no change. Both fixed and variable interest rates on operating, machinery and real estate loans all decreased somewhat from the previous quarter.

Cash rents and land values

Continuing a trend of the past several years, average cash rents and land values for nonirrigated and irrigated cropland as well as ranchland in the district all showed dramatic increases from the past year, according to survey respondents. The largest increases were seen for nonirrigated farmland, which increased in value by 26 percent, while cash rents for it rose by 16 percent. Ranchland increased in value by 14 percent and also saw a 5 percent increase in cash rents. While both factors increased on average throughout the district, Wisconsin experienced a decrease of 2 percent in ranchland values, while rental rates for North Dakota irrigated cropland were unchanged. The Dakotas saw the greatest gains in nonirrigated land value, with a 30 percent increase in each state, while South Dakota lenders reported the highest increase in nonirrigated cash rents, at nearly 20 percent.

Drought impacts

Because of this summer’s severe drought, the third-quarter survey asked lenders a special question about its impact on agricultural producers. Lender response was mixed across the district, reflecting a wide variety of impacts depending on geographic area and agricultural outputs. In heavily drought-stricken areas, crop producers suffered low yields. Further, poor hay production and higher feed costs stressed livestock and dairy producers. Across the district, 41 percent of lenders surveyed said producers in their areas suffered some financial damage, and another 2 percent reported severe financial harm.

However, the drought put upward pressure on already high commodity prices, and crop producers in areas that received more rain, such as North Dakota and Minnesota, are reaping huge profits. Thus, 21 percent of lenders said the drought conferred some financial benefit to their clients, and 15 percent said it had major financial benefits. The remaining 21 percent of lenders said there seemed to be no net effect. In comments, some of these lenders indicated that higher prices cushioned the drought’s effects or that crop insurance prevented bigger losses.

Outlook

Expectations for the final quarter of 2012 are generally positive, as a lender from Minnesota reported, “Looks like [the] farm economy will continue to be good for another year.” Across the district, 94 percent of lenders predicted that farm income will either increase or remain steady, with slightly lower expectations for household and capital spending (92 percent and 84 percent, respectively). Loan repayments, renewals and the amount of required collateral were also largely expected to remain unchanged in the upcoming quarter. The outlook for loan demand was more mixed, with nearly a third of lenders expecting demand to decrease, while 22 percent expect increases.

Comments from some lenders indicate a more pessimistic long-term outlook, due to concerns the drought might persist. “If crops are planted in dry soil in the spring, it could be a major problem when it comes to the 2013 harvest,” noted a lender in an area of Minnesota that fared well this year. A comment from drought-stricken South Dakota was more dire: “If we do not get moisture next spring [it] will be devastating to cattle producers and grain farmers.”

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Most district agricultural producers endure drought in good financial condition]]> State Fact Sheet 2012-12-26T00:00:00-06:00 2012-12 Agricultural Credit Conditions Survey December 2012 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=5020 2012-12-26T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Most district agricultural producers endure drought in good financial condition

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Strength in agriculture continues as producers move into planting season]]> State Fact Sheet 2012-06-22T00:00:00-06:00 2012-06 Agricultural Credit Conditions Survey June 2012 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4913 2012-06-22T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Strength in agriculture continues as producers move into planting season

Farm income, household spending and capital investment

Just over half of district lenders reported that farm incomes increased in the first quarter of 2012, and 39 percent said that incomes saw no change. Wisconsin experienced the most widespread increase in income in the district, with 67 percent of respondents reporting higher farm income. Household and capital spending within the district also increased, with 97 percent of lenders reporting increases in or steady levels of household spending and 94 percent reporting unchanged or higher capital spending. The reported results were generally consistent throughout the Ninth District, showing steady growth.

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Loan repayments and renewals

Agricultural producers in the district are maintaining their rate of loan repayments, and renewals are similarly holding steady. Loan repayments were unchanged for 55 percent of respondents, while 44 percent reported higher repayment rates. A majority of lenders, 77 percent, stated that the number of renewals has held steady, and 19 percent reported a lower number of renewals.

Demand for loans, require collateral and interest rates

Farm households remain flush with cash, and correspondingly their demand for loans fell slightly from the last survey. Almost 45 percent of lenders experienced no change in loan demand, and 37 percent indicated that loan demand has decreased. The amount of required collateral remained flat, with 94 percent of respondents reporting no change. Both fixed and variable interest rates on operating, machinery and real estate loans all decreased somewhat since the past quarter.

Cash rents and land values

The average cash rents and land values for nonirrigated and irrigated cropland as well as ranchland in the district all showed increases from the past year, according to survey respondents. The largest increases were seen for nonirrigated farmland, which increased in value by 26 percent, while cash rents for it rose by 20 percent. Ranchland increased by almost 17 percent in value and also saw an 18 percent increase in cash rents. While both factors increased on average throughout the district, Montana experienced a decrease of 18 percent in cash rents for ranchland. South Dakota had the greatest gains in nonirrigated land value, with an increase of 38 percent, as well as in nonirrigated cash rents, which increased 29 percent.

Outlook

Expectations for the second quarter of 2012 are generally positive, as a lender from Minnesota reported, “Looks like [the] farm economy will continue to be good for another year.” Almost 80 percent of lenders predicted that farm income will either increase or remain steady, and the majority of respondents expected no change in household and capital spending (62 percent and 51 percent, respectively). Loan demand, loan renewals and the amount of required collateral were also largely expected to remain unchanged in the upcoming quarter.

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Farm income, household spending and capital investment

Though farm income growth rates declined slightly from the previous quarter, they remained at high levels. More than half of district lenders said farm incomes increased in the third quarter, and 37 percent reported that incomes were flat. Minnesota had the highest or most consistent increase, with 68 percent of respondents reporting higher income in the third quarter. Both household and capital spending increased throughout the district as well, with 96 percent of respondents reporting unchanged or increased capital spending and 95 percent reporting steady or growing household spending. While these results were consistent across district states, in North Dakota, which was badly hit in some areas by flooding, 29 percent of respondents reported decreased farm income.

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Loan repayments and renewals

Agricultural producers are holding steady on repayments and loan extensions. More than 58 percent of the lenders responding to the survey reported no change in loan repayments, while fewer than 3 percent reported decreased levels. Similarly, 84 percent of the lenders reported no change in the number of loan renewals or extensions.

Demand for loans, require collateral and interest rates

The demand for loans in the district was similar to the demand in the second quarter, with 55 percent or more of the responding lenders reporting no change and 32 percent reporting decreased loan demand. This result was consistent across all district states, but in Montana 91 percent of respondents saw no change in loan demand. For the second quarter in a row, no banks reported refusing a loan because of fund shortages. Both fixed and variable operating, machinery and real estate interest rates fell slightly from their second-quarter levels.

Cash rents and land values

The district’s average cash rents and land values for nonirrigated, irrigated and ranchland all increased from the previous year. Nonirrigated farmland saw the largest increases, with the average cash rent increasing 24 percent over last year and the average land value increasing 26 percent. Increases for irrigated farmland came next (12 percent increase in cash rents and 18 percent increase in land value), and gains in ranchland rose more rapidly than in recent quarters (11 percent and 14 percent, respectively). Both measures increased throughout the district, but average cash rents for irrigated farmland fell by 22 percent in North Dakota. South Dakota saw the biggest increases in nonirrigated land values, at nearly 30 percent, while Montana’s were the most modest at just under 11 percent.

Outlook

Expectations for the fourth quarter of 2011 are strong. A banker in Minnesota summed it up: “We expect large cash deposits… [and] debt repayment should be higher than expected with the additional cash; we expect less borrowing and additional capital purchases.” Nearly 54 percent of lenders responding to the survey predict that farm income will increase in the fourth quarter, 50 percent expect to see increases in capital spending and 42 percent expect increases in household spending. Loan demand, loan renewals and the amount of required collateral are expected to remain unchanged in the fourth quarter.

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agricultural vigor continues in third quarter; outlook positive ]]> State Fact Sheet 2011-12-08T00:00:00-06:00 2011-12 Agricultural Credit Conditions Survey December 2011 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4782 2011-12-08T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agricultural vigor continues in third quarter; outlook positive

Farm income, household spending and capital investment

Bolstered by continued strong crop prices, farm incomes remained at high levels. “Customers continued to take advantage of higher prices and have been forward pricing their grain and livestock,” noted a Yankton, S.D., banker. Half of district lenders said farm incomes were unchanged in the first quarter, and 40 percent reported increases. Both household and capital spending increased throughout the district as well. These results were consistent across district states.

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Loan repayments and renewals

Loan repayment rates mostly held steady after increasing in recent quarters marked by income growth, and renewals were flat or decreased. About 62 percent of the lenders responding to the survey reported unchanged rates of loan repayments, while only one bank reported a decrease. Three-quarters of respondents reported no change in the number of loan renewals or extensions.

Demand for loans, require collateral and interest rates

A lender in Lucan, Minn., described the market for agricultural loans concisely: “Higher incomes have reduced borrowing needs for many of our customers.” More than a third of the survey respondents said loan demand decreased from a year earlier, and 52 percent said it was unchanged. This was mostly consistent across district states, but more lenders in South Dakota reported decreases than flat demand. Just over 90 percent of respondents said collateral requirements for borrowers were unchanged. None of the lenders in the survey said they refused a loan because of fund shortages. Fixed interest rates on loans for operating, machinery and real estate decreased slightly from the first quarter of 2011, as did variable rates for real estate; variable rates for operating and machinery increased slightly.

Cash rents and land values

Cash rents and farmland values continued to soar. Average cash rents and land values for irrigated and nonirrigated land mostly increased from the previous year across the district. Nonirrigated farmland saw bigger gains in rents and land values, with the average rent increasing 21.9 percent over last year and the average land value increasing 22 percent. Irrigated farmland saw rents and land values increase 16.7 and 18.1 percent, respectively. Ranchland saw rents increase by 7.9 percent, while values rose 13.1 percent. Minnesota saw the biggest growth, at about 25 percent in all three categories. In Montana, farmland values were roughly unchanged from a year earlier, while ranchland prices actually decreased 7.5 percent. However, it should be noted that the number of survey respondents from Montana was small.

Outlook

“Most farmers should show a strong 2011 if Mother Nature cooperates,” said a lender in Pigeon Falls, Wis. That could be a big “if.” A late, wet spring held back planting, and summer flooding damaged crops in many areas of the district. A North Dakota lender said 20 percent to 40 percent of area cropland was not seeded, while another lender noted a county in South Dakota where only 30 percent of land was planted. However, the outlook of ag lenders remains positive, with more than half expecting farm incomes to remain at current levels and 40 percent expecting increases in the third quarter. About a third of lenders expect increases in household spending, and 41 percent expect increases in capital investment. Most lenders expect loan renewals and the amount of required collateral to remain unchanged. More than 60 percent expect loan demand to be unchanged, but 18 percent expect it to increase.

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Despite difficult weather, farm incomes and land values rose again in the spring]]> State Fact Sheet 2011-09-26T00:00:00-06:00 2011-09 Agricultural Credit Conditions Survey September 2011 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4743 2011-09-26T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Despite difficult weather, farm incomes and land values rose again in the spring

Farm income, household spending and capital investment

Thanks to large harvests and high crop prices, farm incomes continued to increase. Fifty-seven percent of district lenders responding to the survey said farm incomes increased in the first quarter, and fewer than 3 percent reported decreases. The results were broadly similar throughout district states. Both household and capital spending increased across the district as well. This may be driven directly by higher incomes and also indirectly through higher tax bills those incomes create. "Many farm customers foresee a large tax problem in 2011," commented a Minnesota lender. "Many are making purchases to offset taxes and are not waiting to year-end as they did last year."

Loan repayments and renewals

Consistent with previous periods of rising farm incomes, loan repayments increased and renewals mostly held steady or decreased. About 49 percent of the lenders responding to the survey reported a higher rate of loan repayments, while only one bank reported a decrease. More than two-thirds of responding lenders, 71 percent, reported no change in the number of loan renewals or extensions.

Demand for loans, require collateral and interest rates

Lenders largely reported that loan demand decreased or was unchanged. More than a third of the survey respondents said demand decreased from a year earlier, and 45 percent said it was unchanged. This was mostly consistent across district states, with fewer lenders in Montana and Wisconsin reporting decreases and more reporting flat demand. Only one bank surveyed reported refusing a loan because of fund shortages. Fixed and variable interest rates on loans for operating, machinery and real-estate decreased slightly from the fourth quarter of 2010.

Cash rents and land values

Cash rents and farmland values continued to grow substantially, according to survey respondents. Average cash rents and land values for nonirrigated land, irrigated land and ranchland mostly increased from the previous year across the district. Nonirrigated farmland saw the largest gains in cash rents, with the average increasing 10.7 percent over last year and the average land value increasing 13.9 percent. Irrigated farmland saw rents and land values increase 8.5 and 10.8 percent, respectively. Ranchland saw smaller increases for rents and values (up 2.8 percent and up 0.6 percent, respectively). Changes varied across district states, with values for Montana irrigated farmland and Montana and South Dakota ranchland falling slightly from the previous year. Rents for Montana irrigated farmland fell 31.9 percent.

Outlook

Weather conditions during planting are of concern, with a cold, wet spring and flooding in some areas. "Looks like spring will be late," noted a North Dakota lender. Crop progress reports from the U.S. Department of Agriculture confirmed that planting was behind average in the region and crop emergence has been especially slow. However, ag lenders' outlook remains positive, with more than 57 percent of respondents expecting farm incomes to increase and 40 percent expecting them to stay the same in the second quarter. Nearly 46 percent of responding lenders expect increases in household spending, and 58 percent expect increases in capital investment. Most lenders expect loan renewals and the amount of required collateral to remain unchanged in the second quarter. More than half expect loan demand to stay the same, but about a quarter expect it to increase.

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Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agricultural producers see higher incomes and land values going into planting season; weather is a concern ]]> State Fact Sheet 2011-06-15T00:00:00-06:00 2011-06 Agricultural Credit Conditions Survey June 2011 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4688 2011-06-15T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agricultural producers see higher incomes and land values going into planting season; weather is a concern

Farm income, household spending and capital investment

A Minnesota banker summed up the picture for farm incomes and capital investment: “Excellent crops in this area with high prices. Farmer[s] are updating their machinery or buying new pickups.” The trend of rising farm incomes continued from the third quarter, but increases were more dramatic. Nearly 78 percent of lenders reported that farm income increased in the fourth quarter. Fewer than 2 percent of survey respondents said income went down. Even in Montana, which had the fewest lenders reporting gains in income, 64 percent said it increased; South Dakota had the most reports of increase, at 90 percent. Consistent with expectations from the previous survey, 69 percent of lenders said capital spending increased in the fourth quarter. The outlook for capital spending was also elevated, with 57 percent of respondents expecting an increase in the next quarter, and 41 percent predicting no change.

Loan repayments and renewals

As might be expected during a period of sharply higher incomes, loan repayments increased, and renewals mostly held steady or decreased. About 47 percent of the lenders responding to the survey reported a higher rate of loan repayments, while only one bank reported a decrease. A strong majority of lenders, 70 percent, reported no change in the number of loan renewals or extensions.

Demand for loans, required collateral and interest rates

Loan demand was largely unchanged, also continuing a trend from the previous quarter. Half of the lenders responding to the survey reported no change from a year earlier. This was mostly consistent across district states. However, in Montana, 45 percent of lenders reported an increase in demand for loans—a roughly equal proportion to those reporting no change—and in Wisconsin 44 percent said demand decreased. After a full year with no banks reporting refusing a loan because of fund shortages, two banks said they did so in the fourth quarter. Fixed and variable interest rates on loans for operating, machinery, and real-estate fell from their third quarter levels.

Cash rents and land values

Cash rents and farmland values grew robustly. The district’s average cash rents and land values for nonirrigated land, irrigated land, and ranchland all increased from the previous year. Irrigated farmland saw the largest gains in cash rents, with the average increasing 14.4 percent over last year and the average land value increasing 14.7 percent. Increases for non-irrigated farmland saw bigger gains in land values, with a 16.6 percent increase and a 10.4 percent increase in cash rents. Ranchland saw substantial increases for rents and values as well (up 5.3 percent and up 7.4 percent, respectively). Land values for all categories increased in every district state, with the sole exception of Montana ranchland, which fell 1.7 percent from the previous year. Cash rents varied more widely, from double-digit increases across all categories in Wisconsin to a 2.5 percent decrease on irrigated farmland rents in Montana.

Nearly two-thirds of respondents to a special survey question about land sales said the number of land sales decreased or was unchanged. All of those who responded that land sales increased reported that the majority of sales were to farmers, as opposed to nonfarm uses such as hunting and recreation.

Outlook

Expectations for the first quarter of 2011 are good. Prices are up nearly across the board. A Montana lender noted that 2010 was, “one of those rare years where both of our area’s major commodities’ [wheat and cattle] prices were strong.” Nearly two-thirds of lenders responding to this survey predict that farm income will increase in the first quarter of 2011, and 57 percent expect to see increases in capital spending. Respondents were roughly split on whether they think household spending will increase or remain unchanged. Lenders expect loan demand and repayment rates to increase, while they expect renewals to decrease and collateral requirements to remain unchanged.

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Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agriculture strong in fourth quarter 2010; land values and farm incomes grew]]> State Fact Sheet 2011-01-01T00:00:00-06:00 2011-01 Agricultural Credit Conditions Survey January 2011 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4625 2011-01-01T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agriculture strong in fourth quarter 2010; land values and farm incomes grew

Farm income, household spending and capital investment

The declining farm income reported in the past several quarters seems to have turned around, and many lenders expect to see more increases next quarter. The lenders responding to the survey reported that farm income was higher in the third quarter than in the same period a year ago. In fact, 36 percent of the lenders (43 banks) reported higher income, whereas only 11 percent (13 banks) reported lower income. Montana had the highest or most consistent increase with 50 percent of respondents reporting higher income in the third quarter. In keeping with the positive income growth in the third quarter, 63 percent of the lenders responding to the survey predict that income will also be higher next quarter. According to one Minnesota lender, “Initial yields [were] considerably higher than expected, and with current prices income, will be higher than planned.” The majority of lenders who responded to the survey also reported very small increases in household and capital spending, and higher-than-expected income has caused many to expect increases in capital spending for the next quarter. In fact, lenders in all states predict higher capital and household spending next quarter compared with a year ago.

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Loan repayments and renewals

Agricultural producers are holding steady on repayments and loan extensions. Three-quarters of the lenders responding to the survey (93 banks) reported no change in loan repayments, while only 5 percent (6 banks) reported increased levels. Similarly, 84 percent of the lenders reported no change in the number of loan renewals or extensions.

Demand for loans, required collateral and interest rates

The demand for loans in the district was similar to the demand a year ago, with 50 percent or more of the responding lenders reporting no change. This result was consistent across all district states except South Dakota, where respondents saw a decrease in the demand for loans from the same period a year ago, and North Dakota, where lenders reported a very small increase in demand. For the fourth quarter in a row, no banks reported refusing a loan because of fund shortages. Both fixed and variable operating, machinery and real estate interest rates fell just slightly from their second-quarter levels.

Cash rents and land values

The district’s average cash rents and land values for nonirrigated, irrigated and ranchland all increased from the previous year. Nonirrigated farmland saw the largest increases, with the average cash rent increasing 6.6 percent over last year and the average land value increasing 9 percent. Increases for irrigated farmland were close behind (5.3 percent increase in cash rents and a 6.8 percent increase in land value), while gains for ranchland were more modest (1.4 percent and 3 percent, respectively). In addition, all states except Minnesota and Montana reported increases in both measures. Average cash rents for irrigated farmland fell by 2.5 percent in Minnesota, and nonirrigated farmland in Montana fell by 9 percent.

When lenders were asked what return investors expected on land purchases, the responses ranged from 3 percent to 12 percent. The expectations were highest in Wisconsin, where the average response was 8.4 percent. The average response in North Dakota was 6.3 percent, while in Minnesota, Montana and South Dakota, the average response was between 4.4 percent and 4.9 percent.

Outlook

Expectations for the fourth quarter of 2010 are good. As one lender in Minnesota reported, “The crop outlook in southern Minnesota and northern Iowa is excellent.” Despite wet weather in South Dakota, multiple lenders reported that calf and grain prices are favorable and that land values are holding steady. Over 63 percent of lenders responding to the survey predict that farm income will increase in the fourth quarter, and over 50 percent expect to see increases in capital spending. Household spending, loan demand, loan renewals and the amount of required collateral are expected to remain unchanged in the fourth quarter.

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Farm income holds steady in third quarter 2010; outlook is positive]]> State Fact Sheet 2010-10-01T00:00:00-06:00 2010-10 Agricultural Credit Conditions Survey October 2010 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4578 2010-10-01T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Farm income holds steady in third quarter 2010; outlook is positive

Farm income, household spending and capital investment

The decline in farm income that started during the fourth quarter of 2008 continued. Forty-one percent of all survey respondents indicated that their farm customers’ income was down, while only 11 percent reported increased income. Meanwhile, farmers appear to have coped with financial pressures by continuing to cut back on household spending and capital investment: only 11 percent of respondents reported higher household spending, and 14 percent reported higher capital investment compared with the same period last year.

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Loan repayments and renewals

The rate of loan repayment also did not improve much from the first quarter. Less than 9 percent of respondents reported higher levels of repayment, while 18 percent reported lower levels. “Some of our farmers and ranchers were not able to pay back” reported a lender in North Dakota, attributing the failure to high costs and low selling prices of wheat. (This survey was completed before the recent run-up in world wheat prices.) Less than 2 percent of lenders surveyed noted decreases in loan renewals or extensions, and 11 percent reported increases.

Demand for loans, required collateral and interest rates

The demand for loans remained relatively constant, with a quarter of respondents reporting increased demand and 20 percent reporting decreases. Lenders remained cautious: No lowering of collateral requirements was reported, although slightly fewer lenders (14 percent) increased the requirements compared with the first quarter. Nonetheless, for the third quarter in a row, no lenders reported refusing a loan because of fund shortages. Interest rates did not change much from the first quarter.

Cash rents and land values

Cash rents and farmland values continued to be strong. Average cash rents for irrigated and nonirrigated farmland were up from a year ago about 6 percent and 10 percent, respectively. However, average cash rents for ranchland decreased by about 3 percent. Meanwhile, average values for irrigated and nonirrigated farmland increased by 6 percent and 8 percent, respectively, from a year ago. “Bankers are starting to get concerned over how much longer these rents and prices can stay this high,” a Minnesota lender said. Ranchland prices dropped 2 percent from a year ago. For more detailed information on agricultural prices, see the Minnesota Land Economics Web site.

Outlook

The survey does not paint a rosy picture of financial conditions for the third quarter. Only about 11 percent of lenders expect farm income to be higher in the third quarter, while 33 percent expect lower farm income. Less than 9 percent of lenders expect capital spending and household spending to increase. The majority of lenders anticipate that loan demand as well as loan renewals and extensions will remain constant or increase. Credit conditions are expected to stay tight, as no lenders expect to lower collateral requirements.  

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates

Percent of respondents who reported increased levels for the past three months compared with the same period last year:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agriculture still struggles during second quarter 2010]]> State Fact Sheet 2010-08-01T00:00:00-06:00 2010-08 Agricultural Credit Conditions Survey August 2010 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4529 2010-08-01T00:00:00-06:00 Percent of respondents who expect decreased levels for the next three months:

Percent of respondents who expect increased levels for the next three months:

Note: The Upper Peninsula of Michigan is not part of the survey.

Return to: Agriculture still struggles during second quarter 2010]]> State Fact Sheet - Outlook 2010-08-01T00:00:00-06:00 2010-08 Agricultural Credit Conditions Survey August 2010 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4483 2010-04-01T00:00:00-06:00 Farm income is still falling; however, most other financial measures have held steady or improved slightly, according to the Minneapolis Fed’s first-quarter (April) agricultural credit conditions survey. Land values are higher in almost all categories, and interest rates on loans did not change much from the last quarter. The outlook for the second quarter of 2010 is also slightly positive with all states in the district expecting unchanged levels of net farm income and farm household spending. In addition, all states except Montana expect consistent levels of farm capital spending.

Farm income, household spending and capital investment

“2009 was much less profitable than the previous two years for most of our farmers,” said a South Dakota lender. Thus, it is not surprising that 50 percent of lenders that responded to the survey indicated that farm income was down, while only 17 percent reported increased income. A North Dakota lender said that “lower protein wheat has reduced expected farm income.” Both household and capital spending were unchanged across the district, except in Montana, which reported reduced capital investments similar to last quarter.

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Loan repayments and renewals

Agricultural producers are still delaying repayments or extending loans. A quarter of the lenders (29 banks) reported lower loan repayments, while less than 9 percent (10 banks) reported higher levels. Similarly, almost a quarter of the lenders reported a higher number of extensions, with the majority of the remaining lenders reporting no change.

Demand for loans, required collateral and interest rates

The demand for loans was flat across Minneapolis and North Dakota, but was up in both Wisconsin and South Dakota. In Minneapolis, a lender reported that “farmers are asking [for] less borrowing from banks because farm income was excellent in the last two years.” In Wisconsin, 44 percent of lenders responding to the survey reported an increase in demand for loans, while only 22 percent reported a decrease. The amount of required collateral was up just slightly across the district, with 17 percent of responding lenders reporting an increase and the rest reporting no change. For the second quarter in a row, no banks reported refusing a loan because of fund shortages. Fixed operating and machinery interest rates did not change from fourth quarter 2009, but variable operating interest rates increased by 10 basis points, and both fixed and variable real estate interest rates decreased by 10 basis points.

Cash rents and land values

Average cash rents and land values were up in all categories except rented ranchland. Irrigated farmland values increased by almost 6 percent from a year ago and 2 percent from last quarter. The increase was most dramatic in North Dakota, where irrigated farmland increased in value by 28 percent from a year ago. For the district, average nonirrigated farmland values were up 5.3 percent over last year, but were down in Wisconsin and Montana (3.2 and 1.8 percent, respectively). Average cash rents for ranchland are down 6.4 percent from last quarter and 4.5 percent from last year.

Outlook

Moisture conditions are of concern. A lender from South Dakota reported that “very wet conditions and flooding continue to impact the 2009 corn harvest and will impact spring planting unless we have an extended dry period.” However, with the exception of farmers’ income, expectations for the second quarter of 2010 are not bad. Over 40 percent of lenders in all states, excluding North Dakota, expect farm income to decrease next quarter; however, capital expenditures and household spending are expected to remain the same. Loan demand, loan renewals and the amount of required collateral are also expected to remain unchanged in the second quarter.

Appendices:

• State Fact Sheet | State Fact Sheet–Outlook
• Agricultural Interest Rates