Drought-Reduced Incomes Boost Farm Lending, Finds Survey

23 Nov Drought-Reduced Incomes Boost Farm Lending, Finds Survey

November 23, 2012
By: Indiana AgriNews (Indianapolis)

OMAHA, Neb. — Drought cut Tenth District farm in-comes in the third quarter, especially for livestock producers, boosting demand for farm operating loans, according to the Federal Reserve Bank of Kansas City’s quarterly Sur-vey of Agricultural Credit Con-ditions.

The drought had little impact on farmland markets in the district, however.

Farm incomes fell sharply during the quarter as escalating feed and fuel prices pushed production costs higher. Shrinking incomes spurred demand for farm operating loans as corn and soybean farmers and cow-calf operators searched for funds to pay for rising input costs.

Livestock enterprises faced the biggest shifts in income and financing needs. As drought conditions intensified during the summer, pastures dried up, feed costs soared with grain prices and income at livestock operations slumped.

Bankers surveyed expected high crop prices and crop in-surance payments to support crop incomes. Still, they reported that corn and soybean in-comes fell below last year’s highs due to elevated fuel costs and reduced yields.

Bankers indicated that demand for quality farmland outpaced supply, even with more land being put up for sale. Both non-irrigated and irrigated cropland values re-mained well above year-ago levels, although the price gains began to slow.

Bankers expressed some concerns about the effects of the drought extending into 2013.

The spike in feed costs forced some herd liquidations in the Tenth District.

Bankers indicated that further liquidations may be wa-rranted if grain inventories remain low and inadequate moisture levels persist.

The complete bank survey is available at www.KansasCity-Fed.org/agcrsurv/agcrmain. htm.