The Federal Reserve Bank of Kansas City has issued the 10th District Survey of Agricultural Credit Conditions, stating that farm income and credit conditions continued to deteriorate in the third quarter of 2018.
In other words, farm income has yet to rebound in the Midwest.
Economist Nathan Kauffman, Omaha branch executive with the Kansas City Fed, says farmers have been cutting expenses, some even taking off-the-farm jobs to cope.
“So, there have been some ways that farmers have adjusted to some of these challenges, but again the longer that it persists the pressure just continues to build at a relatively modest pace,” Kauffman tells Nebraska Radio Network.
Agriculture finds itself in the fifth year of the downturn.
Agricultural sectors which continues to struggle include soybean, corn, hog and dairy production. Kauffman says soybeans, one of Nebraska’s major crops and its primary cash crop, has been hurt by falling prices He says while corn is “relatively subdued,” the drop in commodity prices is more pronounced for soybeans.
Beef has been stable and while prices remain flat, demand remains strong.
Trade disputes are a culprit, according to the Fed survey, and Kauffman says anything that can boost commodity prices, especially for soybeans, would help turn things around.
“So, certainly some resolution on the trade front I think could be one of those that could provide some spark to demand,” Kauffman says. “Outside of some markets of concern, such as China, demand really has remained pretty strong.”
Kauffman says strong farmland prices provides a silver lining to the ag economy, providing farmers and ranchers with needed equity to back loan requests. The Fed cautions though that increased stress in the farm sector could put pressure on farmland values. Kauffman says many farmers and ranchers also banked money during the good times about eight to 10 years ago, which have left them in a better position to weather the storm.
Still, loan portfolios, according to the Fed report, show slightly higher levels of risk due to lower repayment rates and a deterioration of working capital.
AUDIO: Brent Martin reports [:45]