Agricultural Economy

An article on the front page of Saturday’s Des Moines Register explored issues associated with corn and soybean production, prices, and farm profitability in Iowa.  Meanwhile, the Federal Reserve Bank of Kansas City released a paper last week which noted that, “Lending at agricultural banks appeared to stabilize in the third quarter of 2017, but risks in the sector have remained alongside a persistently weak agricultural economy.”  Today’s update includes highlights from these two current news items that shed additional light on the state of the Corn Belt farm economy.

On Wednesday, the Federal Reserve Board released its October 2017 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.

Earlier this week, the Federal Reserve Bank of Dallas released its Agricultural Credit Survey for the third quarter of 2017. The Fed update indicated that, “Demand for agricultural loans overall decreased for the eighth consecutive quarter. Loan renewals and extensions continued to increase.”  

Iowa State University (ISU) Extension Economist Alejandro Plastina penned a recent article titled, “Financial Stress in Iowa Farms: 2014-2016.”  Today’s update recaps some of the key findings from the ISU article.

Reuters writer Rod Nickel reported yesterday that, “On Canada’s fertile Prairies, dominated by the yellows and golds of canola and wheat, summers are too short to grow corn on a major scale. But Monsanto Co is working to develop what it hopes will be North America’s fastest-maturing corn, allowing farmers to grow more in Western Canada and other inhospitable climates, such as Ukraine…The question, amid historically high supplies and low grain prices, is whether the world really needs more corn.”

Donnelle Eller reported on the front page of Friday’s Des Moines Register that, “After three years of decline, Iowa farmland values bumped nearly 3 percent higher this year, but experts say it’s unlikely a signal the ag downturn has turned a corner. Iowa farmland values are climbing because of limited supply of farms for sale, outweighing concerns about low corn and soybean prices that drive income from the land, experts say.”

Cole Epley 
and Barbara Soderlin reported on the front page of the Money section in Friday’s Omaha World-Herald that, “Farmers heading into harvest season have reason to believe the nation’s struggling agriculture economy won’t get much worse. Still, there is only faint hope that it will get much better anytime soon.”

Last month, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri released its latest baseline update for U.S. agricultural markets.  Recall that in its March baseline report, FAPRI indicated that, “The latest analysis of national and global agricultural trends from the University of Missouri indicates continued financial pressure on United States farm sector.”  Today’s post summarizes highlights from the August FAPRI baseline report, which noted that, “the outlook now is more nuanced.”

On Wednesday, the Federal Reserve Board released its August 2017 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.

Yesterday, the USDA’s Economic Research Service (ERS) released its August 2017 Farm Income Forecast.  This was the first revision of the initial net farm income forecast released by ERS in February.  Today’s update provides a recap of highlights from the farm income forecast.  As the discussion over the next Farm Bill continues, the ERS update provides an important reference point regarding the current status of the U.S. farm economy.

On Thursday, the Federal Reserve Banks of Chicago, St. Louis and Kansas City each released updates regarding farm income, farmland values and agricultural credit conditions from the second quarter of this year.  Today’s update provides a brief overview of yesterday’s reports.

Last week, USDA’s National Agricultural Statistics Service (NASS) released three important updates that provide current insight into the state of the U.S. agricultural economy.  The releases focused on land values, cash rents, and production expenditures. Meanwhile, USDA’s Economic Research Service (ERS) recently updated its monthly agricultural trade data, and on Monday, included an article related to farm household income in its Amber Waves magazine publication. As lawmakers and the executive branch continue to gather perspective in preparation for the next Farm Bill, today’s post looks briefly at some of the key findings from these recent USDA updates on the farm economy.

In an update last week at The Wall Street Journal Online (“Disaster Looms on America’s Waterways”), Shane Shifflett reported that, “For American producers who rely on the nation’s waterways to export and distribute billions of tons of grains, coal and chemicals each year, aging locks systems on rivers and the frequent delays they cause cost more than just time.”

Last week, Billings Gazette writer Tom Lutey reported that, “The life had been fading from Grant Zerbe’s stunted chickpeas for the better part of a month, and now drought’s hot breath was burning through the final green inch of every plant stem. The Montana farmer’s worst growing season in 30 years was coming to a brutal end. There are few crops to harvest in the region, and with a lack of food and water, unwanted livestock are headed to auction.”

On Friday, Nathan Kauffman and Matt Clark, of the Federal Reserve Bank of Kansas City, penned an update titled, “Farm Lending Steady, but Risks Remain,” which noted that, “Agricultural lending at commercial banks was steady in the second quarter, but risks in the farm sector continued to weigh on loan growth and credit conditions.”  Today’s post looks at the Kansas City Fed article in more detail.

Associated Press writer Blake Nicholson reported on Saturday that, “Drought in North Dakota is laying waste to fields of normally bountiful food and hay crops and searing pastures that typically would be home to multitudes of grazing cattle. Some longtime farmers and ranchers say it’s the worst conditions they’ve seen in decades — possibly their lifetimes — and simple survival has become their goal as a dry summer drags on without a raincloud in sight.”

On Wednesday, the Federal Reserve Board released its June 2017 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.

Earlier this week, the Federal Reserve Bank of Dallas released the results of its 2017 Second Quarter Agricultural Credit Survey, which stated that, “Demand for agricultural loans overall decreased for a seventh consecutive quarter. Loan renewals and extensions continued to increase, albeit at a slower pace.  The rate of loan repayment stabilized after declining for two years. Overall, the volume of non-real- estate farm loans was lower than a year ago, as was the volume of farm real estate loans.  The volume of operating loans increased; all other loan categories’ volumes fell year-over-year this quarter.”

In the spring edition of the Agricultural Policy Review, Iowa State University agricultural economist Wendong Zhang penned an article titled, “Four Reasons Why We Aren’t Likely to See a Replay of the 1980’s Farm Crisis,” where he explained that, “There are plenty of alarming signs indicating a possible farm crisis: current corn prices are half the 2013 peak level of US $7/bushel; farm income has declined for major commodities (corn, wheat, cattle), falling from the previous year to levels well below recent years; weak farm income and worsening credit conditions continue to trim farmland values, which are expected to trend lower in the months ahead, thus weakening the equity position of producers and the collateral value for lenders. Given the heightening farm financial crisis, many agricultural lenders, academics, and other stakeholders in the US farm sector worry another farm crisis is looming. However, there are four economic and legal reasons why this farm downturn is unlikely to slide into a sudden collapse of agricultural markets.”