An influx of government payments and higher prices for agricultural commodities provided greater support for farm finances in the third quarter and seemed to limit demand for financing, said the Federal Reserve Bank of Kansas City in a release.
Despite some improvements in the agricultural economy, farm income and repayment rates remained low during the quarter, albeit not as low as in the second quarter, the bank said. Increased uncertainty related to the pandemic may also have curbed some demand for new loans and could continue to weigh on agricultural lending conditions moving forward.
LOAN DEMAND MODERATES IN ALL DISTRICTS
Farm loan demand moderated in all Federal Reserve districts for the first time since 2013 in the third quarter, the bank said. Although a majority of bankers in the Dallas district have reported lower lending activity since 2016, the third quarter was the first time in seven years that bankers reported a decline in the credit needs of farm borrowers in all districts.
The pace of growth in available funds, however, continued to increase in most districts, the bank said. In all districts, funding at agricultural banks likely was supported by higher deposits and an influx of liquidity from the Federal Reserve and government programs following the outbreak of COVID-19.
In fact, in the second quarter, 85% of bankers in the Kansas City district reported that deposits were higher than a year ago, the report said.
CREDIT CONDITIONS IMPROVE
Alongside reduced lending activity, agricultural credit conditions improved somewhat in the third quarter, the bank said. Although most bankers continued to report that farm income and repayments rates were lower than a year earlier, the pace of decline slowed in all districts.
Compared with last year, farm finances seemed to stabilize the most in the Chicago and Minneapolis districts, where corn and soybeans make up a larger share of farm revenues, the report said.
Farmland values generally remained strong across all regions, the bank said. Values for non-irrigated cropland increased or remained stable in all reporting states and districts.
Gains in land values were most pronounced in states located in the lower Midwest and Southern Plains, the report said. These were: Texas, up 6%; Oklahoma, up 6%; western Missouri, up 6%; the Federal Reserve Bank’s St. Louis district, up 5%, and northern Indiana, up 6%.
The Mountain states, which include Colorado, northern New Mexico and Wyoming also reported land values rising about 6% from a year earlier, although limited survey response from each state forced a comingling of data.
States were farmland values did not do so well were Nebraska, up 3%; Iowa, up 1%; northern Illinois, up 2%, and Kansas, which was down 1%.
CATTLE, BEEF RECAP
Fed cattle trading last week was seen at $109 to $111 per cwt, mostly $110, on a live basis, down $1 to up $1 from the previous week. Dressed-basis trading was done at a steady $172.
The USDA choice cutout Tuesday was up $2.70 per cwt at $244.30, while select was up $2.23 at $219.71. The choice/select spread widened to $24.59 from $24.12 with 118 loads of fabricated product and 43 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.05 to $1.12 a bushel over the Dec CBOT futures contract, which settled at $4.25 3/4 a bushel, down $0.00 3/4.
The CME Feeder Cattle Index for the seven days ended Monday was $137.12 per cwt, up $0.18. This compares with Tuesday’s Jan contract settlement of $138.60 per cwt, up $0.77.