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Agricultural News

Federal Reserve Bank Survey Reveals Farm Economy Continues to Soften, But at a Moderating Rate

Thu, 10 Aug 2017 15:09:16 CDT

Federal Reserve Bank Survey Reveals Farm Economy Continues to Soften, But at a Moderating Rate The Federal Reserve Bank of Kansas City - Omaha Branch reported earlier this summer that a prolonged downturn in the agricultural economy continued into the second quarter of 2017. Recent data from the Bank’s Survey of Agricultural Credit Conditions, though, suggest conditions in the farm sector may finally be stabilizing.

According to the report, agricultural credit conditions weakened further in the second quarter, but the pace of deterioration has begun to slow. Although the rate at which farm loans are being repaid have continued to decrease, the change from a year ago was not as sharp as in recent years. Only 37 percent of bankers that responded to the survey in the Tenth District reported a decrease in repayment rates from a year ago. This is the lowest share since mid-2015, the Federal Reserve reports.

Similar to credit conditions, income in the farm sector continued to weaken as well but not as rapidly as in recent years, the Bank states. Bankers in most Tenth District states said they expected the decline in farm income to be slower in 2017 than in 2016. However, despite some signs of stabilization in the District farm economy, prolonged weakness has continued to dampen business activity on Main Street in rural areas. A majority of bankers responding to the survey say they attribute weaker business activity to the weakening farm economy.

In addition, farmland values continued to trend lower alongside the reductions in farm income and weaker credit conditions, but the Federal Bank says changes have remained modest. For the sixth consecutive quarter, though, the value of cropland and ranchland in the District decreased from a year ago. Similar to recent quarters, they say, the value of irrigated cropland, nonirrigated cropland and ranchland decreased 7 percent, 5 percent and 4 percent, respectively.

The survey also reveals that with the fall harvest approaching, agricultural lenders and borrowers are expressing concern over prospects for the farm economy in the Federal Reserve’s Tenth District, particularly in regions with limited potential for high crop yields. However, bankers seem generally less pessimistic about economic conditions in the farm sector in the second quarter than in each of the past two years.

Read the complete Survey of Agricultural Credit Conditions for yourself, here.

Source - The Federal Reserve Bank of Kansas City - Omaha Branch



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