Banks in the St. Louis Federal Reserve district representing a portion of the Midwest said farm incomes fell again in the fourth quarter of 2014, though quality farmland values were up a bit with pastureland seeing a modest decline year over year.
The St. Louis Fed's area includes Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. Bankers responded to a survey on farm metrics between Dec. 15 and Dec. 31, 2014.
Though the Fed notes that farm income is highly volatile and subject to seasonal patterns, the responding bankers said there was a decline in farm income, farm household spending, and capital equipment expenditures during the fourth quarter of 2014 relative to the same period a year earlier.
Lenders indicated they expected further declines in all three categories during the first quarter of 2015, the St. Louis Federal Reserve said.
"Excellent yields have helped offset lower grain prices for most producers for the 2014 crop, but future incomes are expected to be reduced based on average yields and projected prices for the 2015 crop year," a Missouri lender noted.
Bankers responding to the survey said quality farmland values were up slightly – .08% -- during the fourth quarter from one year ago. Many bankers expect a continued decline over the next three months.
Meanwhile, ranchland or pastureland prices declined 2.6% during the fourth quarter from one year ago.
"It is very difficult for farmers to buy farmland and new equipment with corn prices in the $3.50 range," another Missouri lender said. "Many received much less for their crops this fall. Farmers with a lot of debt cannot postpone the sale of their crop waiting for prices to rebound when they have payments due after harvest."
While cash rent values for quality farmland were up 3.6% in the fourth quarter, lender expectations were lower for the first quarter of 2015. Cash rents for ranchland or pastureland were 2.1% lower in the fourth quarter of 2014, compared with a year ago.
Bankers said there was an increase in loan demand during the fourth quarter from a year ago, though bankers were divided on loan demand expectations over the next three months relative to a year ago.
On the other hand, a larger number of bankers reported they expected loan repayment rates would fall in the first quarter of 2015 relative to a year ago, while availability of funds would remain high.