Executive Summary

The results of this quarter's survey reflect agricultural finance conditions in the Eighth Federal Reserve District during the third quarter of 2019. For the twenty-third consecutive quarter, a solid majority of bankers reported a decline in farm income compared with the same period a year ago. Moreover, bankers expect farm income to decline again next quarter compared with the same period last year. Similar to recent surveys, proportionately more bankers reported that farm household spending and capital spending declined in the third quarter relative to a year ago. They expect these two expenditure categories to decline again in the fourth quarter as well. Quality farmland values fell 1.7 percent in the third quarter from a year earlier, and a slight majority of bankers expect farmland values to decline further over the next three months (fourth quarter of 2019). By contrast, ranchland or pastureland values rose sharply and were reported to be up 10.6 percent from a year earlier; a slight majority of bankers expect ranchland or pastureland values to increase further over the next three months. Cash rents for quality farmland and for ranchland or pastureland rose modestly in the third quarter, but a majority of bankers expect rents to decline over the next three months. Similar to the second-quarter responses, proportionately more bankers reported an increase in loan demand and a decrease in the availability of funds in the third quarter relative to a year ago. Proportionately more bankers reported a decline in the rate of loan repayment in the third quarter. Bankers reported that, compared with the second quarter, interest rates were lower across all loan types in the third quarter. This quarter's survey asked two special questions—one about loan repayment expectations and another about the type of workout arrangement for borrowers having financial difficulties. The first question found that bankers expect operating lines of credit will have the largest increase in repayment problems. Regarding potential workout arrangements, borrowers collateralizing unpaid portions of their operating lines of credit or making a long-term workout with their existing lenders garnered the largest responses from the bankers.