The Federal Reserve Bank of Minneapolis shared the results of its Agricultural Credit Conditions Survey for the first quarter of 2023.
Joe Mahon is the regional outreach director for the Minneapolis Fed. Agricultural lenders say farmers in the Ninth District are in overall solid condition.
“Farmers continue to be in pretty solid condition, and this has been true since the waning period of the pandemic. We’ve seen strong commodity prices, and that’s benefited farm households quite a bit, so we’ve seen continued strong income. The incomes that we saw in the first quarter of 2023 compared to a year earlier increase on balance. We also saw increases in household spending. However, capital spending by farms, purchases of equipment and buildings, was relatively flat overall.”
That lack of increase in capital spending comes from two factors.
“Folks largely attributed that to supply chain issues, availability of equipment, as well as to higher interest rates that it’s going to take to finance those purchases. We did see a continued increase in interest rates – not surprising given the economic environment right now – a higher rate of loan repayment, kind of consistent with the relatively good cash position of farmers and also consistent with that decrease in loan demand. Farmers are demanding less credit because they have more cash on hand. We saw a continued increase in land values and rents from a year ago, and that’s all good news.”
Ag lenders are somewhat less optimistic for the second quarter.
“Looking forward, we also asked these lenders about their outlook for the coming quarter, and that was a little bit more uncertain. In fact, the income picture takes a negative turn, at least in the Outlook. A lot of comments on what was going on behind that. A lot of folks pointed to an expectation for downward movement in agricultural commodity prices and for persistently high input costs kind of compressing those profit margins for farm operations.”
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