Farm credit conditions in the Federal Reserve’s Tenth District continued to deteriorate steadily in the third quarter of 2019, according to Nathan Kauffman, vice president and Omaha branch executive, and Ty Kreitman, assistant economist at the Kansas City Federal Reserve.

Reporting on the Tenth District Survey of Agricultural Credit Conditions, the researchers said that despite a slight increase in the price of some agricultural commodities and additional support from government payments, farm income and loan repayment rates declined at a modest pace.

According to District bankers, agricultural economic conditions in the quarter were influenced by uncertainty about crop production, agricultural trade and other factors that contributed to commodity price fluctuations. Persistent weaknesses in the sector put further pressure on farm finances and signs of modest increases in credit stress remained. Farmland values, however, remained stable and provided ongoing support for the sector.

Farm Income & Borrower Finances

Farm income in the region remained relatively weak and continued to decline, according to the Tenth District Survey of Agricultural Credit Conditions. Despite slightly higher crop prices and support from trade relief payments, farm income decreased compared with a year ago (Chart 1). Recent volatility in crop prices appeared to affect bankers’ perceptions of agricultural conditions in the third quarter, and respondents indicated that farm income declined more than had been expected a quarter earlier. In August, cattle prices dropped sharply in response to substantial disruptions at a major beef processing facility, which weighed on income in the third quarter and affected expectations.

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