Agricultural credit conditions in the Federal Reserve’s 10th District continued to deteriorate at a gradual pace in the third quarter, said Economists Francisco Scott and Ty Kreitman in a report Monday.
The eastern portion of the district lies in the Great Plains and includes Oklahoma, Kansas, Nebraska and the western third of Missouri. The western portion of the district lies along the Rocky Mountains and consists of Colorado, Wyoming and the northern half of New Mexico.
According to responses from the Survey of Agricultural Credit Conditions, farm income in the region was sharply lower, loan repayment was slightly slower and problem loan rates grew slightly, Scott and Kreitman said. Loan demand increased as working capital declined, and lenders reported an increase in asset liquidation.
However, despite the moderation in credit conditions and interest rates remaining at multi-decade highs, farm real estate values remained firm, the report said.
The outlook for the farm sector nearing the end of 2024 remained subdued alongside weak crop prices, the economists said. Farm income and credit conditions continued to weaken more in areas most concentrated in crop production while the strength of cattle prices provided some support to other portions of the region.
The considerable reduction in profits for crop producers weakened farm balance sheets, increased demand for financing and could put more pressure on agricultural credit conditions in the months ahead, they said.
FARM FINANCES AND CREDIT CONDITIONS
The pace of decline in farm income intensified as crop prices remained weak, the Fed report said. About 60% of respondents reported lower farm income than a year ago with only 10% reporting an increase, which was the lowest since 2020. Despite strong cattle prices, incomes in the region contracted alongside sharply lower crop prices.
According to respondents, incomes weakened the most in Kansas, Missouri and Nebraska, the economists said. In Oklahoma, conditions were largely stable, with 30% of lenders reporting incomes were lower than a year ago and another 30% reporting incomes were higher.
As farm finances softened, the pace of decline in loan repayment rates picked up gradually, the economists said. About 25% of respondents reported farm loan repayment rates were lower than a year ago and less than 5% reported an increase.
Looking ahead to the next three months, nearly 40% expected repayment rates to decline.
Respondents anticipated a considerable deterioration in repayment rates for corn, soybean and wheat producers but expected conditions for ranchers and feedlots to improve, the report said. For lenders with hog and dairy customers, loan repayment was expected to decline slightly.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week was not available, compared with last week’s range of $186.88 to $193.00 per cwt. FOB dressed steers, and heifers went for $293.96 per cwt to $299.32, compared with $293.96 to $299.32.
The USDA choice cutout Monday was up $3.94 per cwt at $307.28 while select was down $0.69 at $275.45. The choice/select spread widened to $31.83 from $27.20 with 92 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The USDA-listed weighted average wholesale price for fresh 90% lean beef was $336.82 per cwt, and 50% beef was $165.82.
The USDA said basis bids for corn from feeders in the Southern Plains were down $0.01 to $0.02 at $1.42 to $1.54 a bushel over the Dec corn contract and unchanged in Kansas at $0.25 over Dec, which settled at $4.29 1/4 a bushel, up $0.05 1/4.
The CME Feeder Cattle Index for the seven days ended Friday was $252.31 per cwt, up $1.27. This compares with Monday’s Nov contract settlement of $251.82, up $0.72.