Economists with the Federal Reserve Bank of Kansas City report farm income is down from a year ago, but the decrease is smaller than in recent years. Nate Kauffman, in the Omaha office, says farmers continue to operate under stressful conditions.
“In most cases though it hasn’t led to a lot of widespread default rate increases,” Kauffman says. “So, even though we’re continuing to see some of that increase in financial stress, it doesn’t seem to be so far that it’s affecting the entire sector.”
Kauffman says a survey of bankers in Iowa and six other Midwestern states indicates they’re optimistic long-term, even in the midst of a challenging farm economy.
“I think a lot of lenders might have some borrowers who are facing increasing financial stress and a decent share of their portfolio maybe that’s still actually making money,” Kauffman says. “So, I think that it really depends on a case-by-case basis.” Livestock producers seem to be faring the best and Kauffman says every indication is that the harvest is strong this year.
“That’s good in one sense, that it can help improve cash flow, especially for producers who really saw strong yields,” Kauffman says. “On the other hand, it’s likely to increase inventories even further, which ultimately weighs on prices. We continue to see fairly strong demand for agricultural products but because supply has been so strong, it’s likely to continue to weigh on prices.”
Commodity prices haven’t begun to trend upwards, not yet. “On one hand, it’s positive farm income is showing some signs of stabilizing but on the other hand, because prices are still relatively low and costs are still quite high in some places, there’s not a strong expectation that income is going to be increasing a lot,” he says.
While some producers continue to struggle, Kauffman says those with equity in their operations have been faring the best.