CHICAGO, Ill. (Reuters) — Demand for bank loans and loan extensions and renewals is surging among U.S. farmers, said a quarterly farm economy report from the Federal Reserve Banks of St. Louis and Kansas City.
As well, farm incomes are set to fall for a third year as grain prices remain low.
However, access to such credit tightened in the fourth quarter of 2015 and is expected to continue to be squeezed in the coming year as the rate of farmers repaying their existing lines of credit slows and the value of their land falls, according to the surveys from the banks.
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The U.S. farm economy continued a downward slide in the fourth quarter of 2015.
A strong U.S. dollar, sluggish export demand and a glut of grain have kept bearish clouds over the sector.
The U.S. Department of Agriculture projects that farm net incomes in 2016 will drop to US$54.8 billion, down nearly three percent from 2015.
Cropland values in the St. Louis Fed’s region in the Midwest fell by 2.5 percent during the fourth quarter from a year earlier, while ranchland and grazing pastures dropped by 5.3 percent.
Cash rents for quality cropland were down 9.5 percent, while ranchland and pastureland cash rents increased by 8.6 percent.
However, bankers expect both to decline in the first quarter of 2016.
Farmland values also softened In the Kansas City Fed’s region of the central and western Plains. Irrigated farmland values dropped by two percent in the fourth quarter compared to a year earlier, while non-irrigated farmland dropped by four percent, according to the bank’s survey.
Ranchland values also stalled in the fourth quarter as feeder cattle prices plummeted from the exceptionally high levels earlier in the year, dropping more than 25 percent.
Land prices are expected to continue dropping well into 2016, and liquidity of farms remains among bankers’ top concerns.
