Even before the shank of the winter’s furry with its heavy snow and subsequent flooding, more Minnesota farmers were ready to give up after 2018, according to the Federal Reserve Bank of Minneapolis’ Fourth-Quarter Agricultural Conditions Survey.
Given the role of strong harvests in bolstering farm incomes, some lenders expressed concerns about that luck running out, the Minneapolis Fed said in a release of the survey’s results.
“A year of average yields with current commodity pricing would be very detrimental to our area’s farm operations,” a Minnesota banker told the Fed.
Even so, low or falling commodity prices were by far a bigger worry for the year ahead, according to results of a special question on the survey.
Three of four lenders cited prices as their biggest concern for 2019, compared with only 4% citing problems like severe weather or declining yields. Trade conflict and rising interest rates each were cited as the paramount concern by 10% of respondents.
A BROKEN RECORD
The story has become familiar: Farmers in most areas of the Federal Reserve’s Ninth District had good growing conditions and strong yields last year, but low crop prices held incomes down and pressured finances.
“We are seeing the economic stress rising significantly,” said a rural banker in Minnesota. “Producers are dealing with multiple years of economic pressure, and we are seeing more operations ‘throwing in the towel.’”
Farm incomes and capital spending continued to decrease at the end of 2018, according to the survey. Falling incomes also led to decreased loan repayment rates, while loan demand, renewals and extensions increased.
Farmland values declined slightly, while cash rents were more stable, the survey found. The outlook for the beginning of 2019 was pessimistic, with survey respondents predicting a further decline in income and capital spending.
FARM INCOME TOOK A HIT
More than half of lenders said fourth-quarter farm income decreased, compared with a year earlier, while only 10% reported increases. About two-thirds of lenders said capital spending by agricultural producers fell in the fourth quarter, and another 29% reported it was flat.
A majority of respondents said farm household spending was unchanged, though roughly a third said it decreased.
Consistent with greater financial stress, loan repayment rates decreased, while renewals ticked up, the bank said. About 36% of lenders reported a lower loan-repayment rate from a year earlier, while 61% said repayment rates held steady.
A third of lenders said loan renewal or extension activity increased, while almost all of the remainder noted that renewals held steady.
More than a third of lenders said loan demand increased from 2017, while 56% noted no change. Generally, this was consistent across district states. A strong majority reported no change in collateral requirements, while 11% said collateral requirements increased.
CATTLE, BEEF RECAP
The USDA reports cash cattle sales at $125 to $126 per cwt on a live basis, down $2 to $4 from last week. Dressed-basis sales were slim at $206 to $208, steady to up $1.
The USDA choice cutout Wednesday was down $0.52 per cwt at $228.99, while select was up $1.54 at $220.53. The choice/select spread narrowed to $8.46 from $10.52 with 110 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $142.15 per cwt, up $0.11. This compares with Wednesday’s Mar contract settlement of $142.12, down $0.62, and the Apr contract settlement of $145.90, down $0.32.