Federal Reserve Bank: Q4 Farm Income Rebounds

Prospects for farm income and agricultural credit conditions rebounded sharply in the fourth quarter of 2020, after a survey of farm lenders.

The average price of corn, soybeans and wheat increased more than 20% from the previous quarter, and reached six-year highs in December.  Livestock prices, while still less than a year ago, also improved from lows reached earlier in the year.

Government payments provided broad support through the year, and, together with recent price increases, the near-term outlook for the farm sector improved dramatically.




After nearly eight years of deterioration, farm income across the 10th District rebounded in the fourth quarter alongside sharp increases in crop prices.

A majority of respondents reported that incomes of farm borrowers were higher than a year ago for the first time since 2012.  This was a clear contrast to recent years in which a majority of bankers consistently reported steady declines in farm income.




Areas of the region more dependent on livestock revenues and exposed to severe drought were somewhat less upbeat about fourth-quarter farm income.  For example, the share of bankers that reported higher income than a year ago was far smaller in Oklahoma and the Mountain states, where drought conditions intensified and less revenue was attributed to crop production.

In fact, about 30% of respondents in those states indicated incomes were lower than a year ago, compared with only 8% in all other states.




With a boost in profit opportunities and strong support from government aid, the financial outcome for borrowers in 2020 was notably better than what was expected earlier in the year.

About 80% of bankers expected farm incomes for the year would be higher than initially projected in early 2020 when factoring in government payments; and nearly 20% expected the increase to be significant.

Compared with other states in the District, the turnaround in farm income was less pronounced in Oklahoma and the Mountain states.

enders expected farmers to strengthen their balance sheets and make capital purchases with incomes larger than initially expected. About 60% of respondents listed paying down farm debts or machinery purchases as likely uses of extra income.

Slightly less than half indicated improving working capital also would be a priority and a smaller share anticipated other types of spending.




Fed cattle trading was reported in the Plains at $114 per cwt on a live basis, steady to up $2 from last week.  Dressed-basis trading last week was at $178 to $180 per cwt, up $1 to $2.

The USDA choice cutout Thursday was down $0.06 per cwt at $232.96, while select was off $0.67 at $220.29.  The choice/select spread widened to $12.67 from $12.06 with 78 loads of fabricated product and 26 loads of trimmings and grinds sold into the spot market.

The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.00 to $1.25 a bushel over the Mar CBOT futures contract, which settled at $5.41 a bushel, down $0.06 1/2.

No tenders for delivery were posted Thursday.  Thirty-six heifer and 18 steer delivery intentions were retendered at one against the Feb futures; 46 heifer contracts were retendered at two; 18 steer contracts were demanded at one, 30 heifer contracts were demanded at two; 30 heifer contracts were reclaimed at one, and 16 heifer contracts were reclaimed at two.

The CME Feeder Cattle Index for the seven days ended Wednesday was $135.49 per cwt, down $0.16.  This compares with Thursday’s Mar contract settlement of $139.15 per cwt, down $0.35.