The Federal Reserve Bank of Kansas City says its survey of bankers disclosed grain prices remain weak while livestock prices seem to be rebounding. Farmland values remain strong, dropping only 3% in the first quarter.
Economist Cortney Cowley with the Fed’s Omaha branch says the biggest concern raised in its survey of bankers is loan denials due to poor cash flow.
“One of the bankers that I talked to, just over the phone because we’ll touch base with some bankers throughout each survey, told me that all of their loan denials were due to cash-flow shortages,” Cowley tells Nebraska Radio Network.
Cowley says cash flow and liquidity remain a major problem for farmers and ranchers.
The decline in farm income in the first quarter of this year has not been as steep as in the past, certainly not as bad as in 2016, the worst of the recent downturn.
Cowley notes we are entering the fifth year of the agricultural downturn which began in the second quarter of 2013. She says equity is helping. Farmland values haven’t dropped as drastically as have commodity prices, and that includes all farmland: irrigated, non-irrigated, and ranch.
“In terms of the last few years, there just hasn’t been a lot of farmland come on the market, so there hasn’t been a lot of supply; and demand has remained relatively high, which has supported values,” according to Cowley.
Cowley says that could change if producers are forced to sell assets to service their debts.
Cowley says bankers have been working closely with their agricultural lenders as both seek to maneuver through the economic slump. Cowley says risks remain, but the experience of past slumps, particularly the brutal agricultural downturn of the 1980s, have helped guide them through this prolonged, persistent weakness in commodity prices.
Click here for the first quarter Survey of Agricultural Credit Conditions by the Federal Reserve Bank of Kansas City.
AUDIO: Brent Martin reports [:45]