The farm economy in the Tenth Federal Reserve District weakened in the first quarter of 2017, but conditions varied from east to west, according to the Kansas City Fed’s quarterly Survey of Agricultural Credit Conditions. Farm income, loan repayment rates, and the value of most types of farmland all trended lower in each of the Districts seven states. However, the deterioration in the western portion of the District was more severe than the moderate weakness in the eastern portion.
Since 2014, following a drop in the prices of major row crops, farm income has fallen more sharply in the Mountain States and the western portion of Nebraska, Kansas and Oklahoma. According to the survey, the gap in the performance of the farm sector between the District’s eastern and western portions widened in the first quarter. Alongside persistent weakness in cattle and wheat markets, more than 80 percent of bankers indicated farm income was lower than a year ago in the western part of the District versus about 60 percent in the eastern part.
Whereas bankers throughout the District have expressed ongoing concerns about the state of the farm economy, concerns from bankers further west have been elevated. Since 2016, the rate of deterioration in loan renewals and repayment rates have increased in the west but general softened in the east. The pace of carry-over debt also quickened in the western portion of the District but declined in the east.
As expected, based on recent surveys, District farmland values trended lower in response to conditions in the regional farm economy. The value of nonirrigated cropland declined 3 percent in the first quarter, following similar declines in 2016. The value of irrigated cropland and ranchland also decreased in the first quarter. The recent declines in farmland values in the Tenth District, however, also have been sharper in the west. In fact, according to the survey, nonirrigated cropland values have fallen only 3 percent in the east since the first quarter of 2015, but have dropped 24 percent in the western portion of the District.
Read the complete survey at www.kansascityfed.org/research/indicatorsdata/agcreditsurvey.