A new report from the Federal Reserve Bank of Kansas City shows slight improvements in the farm sector economy.
Although farm income and farm real estate values continued to decline, and credit conditions weakened further, the pace of deterioration has slowed, according to the Fed.
Nathan Kauffman, assistant vice president and Omaha Branch executive with the Federal Reserve Bank of Kansas City, says the second quarter was not quite as negative as it has been the past couple of years.
“As we’ve seen commodity prices be more or less stable the last couple of years, albeit at a lower level, we’re just not seeing the same pace of decline that we would’ve seen a couple years ago as commodity prices had really fallen sharply,” Kauffman tells Nebraska Radio Network.
Not helping producers is the fact interest rates on variable rate operating loans increased to 5.8 percent in the second quarter, the highest in five years.
Kauffman notes that many lenders were caught off guard a few years ago with the decline in commodity prices, but he says it seems like they have adjusted.
“A lot of lenders are still trying to work through some of those issues, communicate more effectively with their borrowers, maybe requiring a little bit more from their borrowers, recognizing that maybe not out of the woods even though things are not deteriorating as rapidly as they had been,” Kauffman says.
The report shows that during the second quarter, more bankers reported denying new farm loan requests compared to the previous two years.
The continued lag in the agricultural economy is weighing on other economic sectors in Nebraska.
“There are a number of businesses that would be involved in providing service to agriculture,” Kauffman says. “So, when there are changes to the agricultural economy, that does have an impact across a larger spectrum of business interests.”
In 2015, Nebraska bankers had expected a significant decline in farm income, but the decline in the last two years has eased, according to the survey report.