Growth in farm real estate values slowed in the first quarter of the year alongside slightly tighter credit conditions and steady interest rates, said Francisco Scott and Ty Kreitman, economists at the Federal Reserve Bank of Kansas City, in a release.
However, farm household spending remained robust, they said.
The statements were the result of a survey of banks across the country gauging farm spending, and agricultural credit conditions.
SURVEY SAYS….
The pace of increase in the value of farmland halved from the previous year in most regions, a bank survey showed. Farmer demand for agricultural loans increased, and repayment rates declined in the quarter, as farm income deteriorated.
Despite some tightening in financial conditions, farm household spending remained robust, and balance sheets appeared to be positioned to sustain thinner profit margins in 2024.
Growth in farmland values continued to moderate, but remained firm, the economists said. The increase of non-irrigated farmland values across surveyed districts averaged 8% in the first quarter, almost half the growth observed in the 2023 quarter.
LOWER AGRICULTURAL PRICES
The slowdown in farmland valuation reflected the marked decline in agricultural commodity prices and softer conditions in the sector, they said.
The pace of increase in agricultural real estate values steadied alongside tighter credit conditions, the economists said. Farm loan repayment rates, on average, deteriorated at a modest pace throughout participating districts.
At the same time, the renewal and extension activity on farm loans increased at a modest rate, they said.
INTEREST RATES ABOUT STEADY
Farm loan interest rates were flat over the first quarter, staying at multi-decade highs, the Bank release said. Alongside steady benchmark rates, the average interest charge on all types of agricultural loans generally was steady from the previous quarter.
Across all districts, average rates remained well above recent years and at the highest levels since 2007, the bank said.
Demand for farm loans increased amid deterioration in farm income and robust household spending, the economists said. Decline in farm income and farmers’ increased financing needs boosted demand for loans in the first quarter.
Household spending moderated at a slower pace than farm income, but remained firm, they said. Credit needs may continue growing if farm income continues to soften alongside robust household spending.
ANALYST WEIGHS IN
In response to the survey results, a market analyst said the continuation of farm household spending reflects the same pattern of non-farm consumers. It seems people still have the cash flow to cover their bills even though total debt is up.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $186.37 per cwt to $190.17, compared with last week’s range of $186.00 to $191.52 per cwt. FOB dressed steers, and heifers went for $291.89 per cwt to $297.04, compared with $291.58 to $299.90.
The USDA choice cutout Wednesday was down $0.61 per cwt at $317.60 while select was off $1.69 at $298.93. The choice/select spread widened to $18.67 from $17.59 with 111 loads of fabricated product and 13 loads of trimmings and grinds sold into the spot market.
The weighted average USDA listed wholesale price for fresh 90% lean beef was $357.19 per cwt, and 50% beef was $72.95.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.46 to $1.56 a bushel over the Jul corn contract, which settled at $4.54 1/4 a bushel, up $0.04 3/4.
No delivery intentions were posted Wednesday for the Jun live cattle futures contract.
The CME Feeder Cattle Index for the seven days ended Tuesday was $253.74 per cwt, up $0.35. This compares with Wednesday’s Aug contract settlement of $257.57, down $0.07.