conditions were strong during the fourth quarter throughout the Ninth
Federal Reserve District, according to the Minneapolis Fed’s fourth
quarter agricultural credit conditions survey. Ag lenders reported that
loan repayments and farm incomes have increased. Corn yields were robust,
while soybean yields suffered due to drought. Dairy farmers have begun
to rebound from previous declines in prices. Cattle prices through 2003
led to higher incomes, but the effects of mad cow disease are expected
to play out this year. The outlook for 2004 is promising, as lenders predicted
an increase in farm income and loan demand.
Farm income, farm household spending and capital investment
- An increase in farm income during the fourth quarter was reported
by 59 percent of respondents, while a third noted no change. Only 8
percent reported below-normal levels of income, the lowest figure in
recent survey history.
- Household spending was strong: One-third of the lenders reported
an increase and 61 percent noted no change in the fourth quarter. And
94 percent predicted household spending would remain constant or increase
during the first quarter.
- Capital spending also stayed fairly stable, with only 16 percent
of lenders reporting a decrease. The outlook for capital spending is
generally positive, although 33 percent of Wisconsin lenders and 23
percent of South Dakota lenders expected a decrease in the first quarter.
Loan repayment, renewals and limits
- Loan repayments were stable or increased across the district during
the fourth quarter. Only 9 percent of lenders reported a decrease in
loan repayments. The demand for renewals or extensions remained constant,
according to 74 percent of the respondents, while 12 percent reported
- District lenders reported that 23 percent of their farm and ranch
customers were at their loan limit—from a high of 33 percent in
Montana down to 18 percent in South Dakota.
Demand for loans, required collateral and interest rates
- Loan demand through the fourth quarter remained steady, as 62 percent
of lenders reported no change and 20 percent noted an increase.
- Collateral requirements were also steady; only 8 percent of lenders
reported an increase and none reported a decrease.
- Average interest rates for fixed and variable loans fell slightly
from the third quarter of 2003, resulting in some of the lowest rates
- Most lenders reported sufficient availability of funds, but 10 percent
of respondents in Wisconsin noted a decrease in their fund availability.
- District ranchland and farmland prices rose an average of 25 percent
and 16 percent, respectively, from fourth quarter 2002.
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 the complete results.