Farm income and agricultural credit conditions continue to deteriorate, according to the latest Ag Credit Survey by the Federal Reserve Bank of Kansas City.
“With low income weighing on farm finances, the pace of decline in farm loan repayment rates increased slightly,” write Nathan Kauffman, vice president and Omaha branch executive, and Ty Kreitman, assistant economist, for the Federal Reserve Bank of Kansas City. “In addition, carry-over debt increased again for many borrowers and bankers continued to restructure debt and deny a modest amount of new loan requests due to cash flow shortages.”
The economic challenges are coupled with relentless weather challenges of major flooding and blizzards across some areas of the Great Plains.
Ag lenders in the Kansas City District, which includes Nebraska, Kansas, Oklahoma, Colorado, Wyoming, northern New Mexico and western Missouri, reported cash flows remained weak during the first quarter of 2019. As a result, bankers continued to restructure debt and even deny some farm loan requests.
Despite moderating from a high of 23% in 2017, about 14% of new farm loan requests involved restructuring to meet liquidity needs. New loan requests were denied at a pace of 8% because of cash flow shortages, a rate similar to a year ago.
Even with higher interest rates and added pressure on farm income and decaying credit conditions, farmland markets remained relatively steady as an important source of support for the district’s agricultural sector. Farm real estate values were relatively steady compared with a year ago. In fact, the value of non-irrigated cropland increased slightly for the first time since 2015. The value of ranchland across the District also increased slightly for the third straight quarter while irrigated cropland declined slightly, but at the slowest rate since 2015.
What are the biggest challenges farmers are facing? How are they coping? Here are a handful of from-the-field ag lender comments.
The flooding conditions will have a significant bearing on replacements costs for infrastructure, livestock and possibly machinery and equipment and will lead to further deterioration of credit quality. – Northeast Nebraska
Severity of winter and spring weather is hindering marketing efforts and excess precipitation during spring has put crop producers well behind schedule in field preparation. – Northwest Missouri
Commodity prices continue to have a drag on farm income and tough winter weather conditions have led to significant calving losses which will compound lower income numbers. – Central Nebraska
With high expenses and low grain prices, cash flow for row crop farmers is weak and carryover debt increased this year. However, cattle producers have been profitable. – Northern Oklahoma
Lower commodity prices continue to put a strain on working capital for all producers regardless of the size of their operation. Cotton is the only commodity in our area that cash flows with a decent return. – South-central Kansas
Livestock producers were able to maintain better returns through the end of 2018. – Southeastern Colorado
Farm income in our area is not good, but not as bad as we had expected. – Central Missouri
With record yields in 2018, many customers that marketed well were able to sell at a level that exceeded their break-even. – Central Nebraska
Most farmers are struggling and it’s becoming hard to keep working with many of them. – Northwest Kansas
Many full-time farmers and ranchers have taken off farm jobs to supplement income. Fortunately, there are plenty of jobs available. – Northeast Kansas
More customers are realizing that their current financial position may not allow them to continue in the future. – Southeast Nebraska
High quality farm real estate appears to be maintaining its value while average to below average quality has been declining. – Central Nebraska