Executive Summary

This quarter's survey assessed the economic and financial conditions in the District's agricultural industry from the perspective of agricultural bankers. For the twentieth consecutive quarter, a majority of agricultural bankers in the Eighth Federal Reserve District reported that farm income had declined in the fourth quarter of 2018 compared with a year earlier. Proportionately more bankers also reported that farm household spending and capital expenditures remained below year-earlier levels in the fourth quarter. Bankers expect similar conditions to prevail for these three indicators in the first quarter of 2019. Despite expectations of falling land values over the past few surveys, bankers reported that the rate of increase in quality farmland and ranchland or pastureland values and cash rents accelerated in the fourth quarter compared with the previous quarter. Interest rates on all six of the fixed- and variable-rate loan categories rose in the fourth quarter. On average, interest rates on variable-rate loan products rose by more than those on fixed-rate loan products. There were three special questions in this quarter's survey. The first question asked agricultural bankers about the health of the rural economy in their region. About two-thirds of bankers reported that local economic conditions were fair, while about a third reported that conditions were good. In the second special question, bankers were asked about the economic outlook for 2019. Two-thirds believe that local economic conditions will remain the same, while a third expect them to worsen in 2019. The third special question asked bankers their expectations for farmland returns in 2019. Nine in ten bankers expect farmland returns to be positive but less than 5 percent.