CHICAGO, (Reuters) – U.S. farm incomes in the Midwest declined yet again in the second quarter of 2019, as record floods devastated a wide swath of the Farm Belt, according to a banker survey released on Thursday by the Federal Reserve Bank of St. Louis.
Nearly two-thirds of the bankers surveyed said a majority of their farm customers were either significantly or modestly impacted by the flooding and other adverse weather earlier this year.
The floods added more pain on farmers who have also been hurt by low crop prices and the trade war between Washington and Beijing, which has slashed shipments of U.S. agricultural products to China. The floods also battered earnings for global grain traders Cargill Inc and Archer Daniels Midland Co, as heavy rains halted barge traffic on the Mississippi River, disrupted cattle shipments and caused some plants to be shuttered.
The second quarter marked the 22nd consecutive quarter for farm incomes dropping in the Eighth Federal Reserve District, which includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
It was the highest proportion of bankers in more than three years who reported that farm income had declined among their customers, according the St. Louis Fed’s survey.
The weak trend is expected to continue in the third quarter, dragged down by the ongoing trade fight between the United States and China, problems with crop production and depressed commodity prices, bankers said.
Farm household spending and farm capital expenditures also were lower for the quarter, compared with a year earlier, raising concerns about potential ripple effects overall on rural communities. But bankers said they did expect such belt-tightening to ease in the third quarter, as farmers prepare for the fall harvest season.
Household and capital spending are both considered closely related to trends in farm income, according to the survey.
But the St. Louis Fed cautioned against drawing “firm conclusions about longer-run trends in farmland values and agricultural lending conditions,” because the number of banker responses in the survey “is relatively small,” according to the survey.