A new report from the Federal Reserve Bank of Kansas City concludes something many Iowa farmers already know — the farm economy has yet to rebound.
Fed economist Nathan Kauffman says farm income and credit conditions continue to deteriorate across the region. “The primary challenge has been low commodity prices,” Kauffman says. “We’ve seen a drop in primarily soybean prices that began earlier this summer and that has persisted through the fall. Revenue has generally been relatively weak so it has continued to weigh on the farm sector.” The report says the agricultural economy continues to suffer from high yields and lower demand, which Kauffman says is primarily due to the trade war with China.
“The China market is very large, especially going into the fourth quarter and into the first quarter,” he says. “Exports to China specifically of soybeans account for a large share of exports during that time.” Kauffman, who is based in Omaha, says farmers have been cutting expenses, some are even taking off-the-farm jobs to cope. He says a resolution of the trade disputes would give commodity prices a boost. Kauffman says the silver lining in the agricultural downturn is strong farmland values.
“It has really supported the finances and the balance sheet of a lot of producers that have equity to be able to tap in terms of farmland values,” Kauffman says. “We continue to watch that just to be sure we’re not seeing some cracks start to emerge in that particular market and so far, it’s held up okay.” Kauffman says crop prices have pulled down the agricultural economy with the livestock sector holding stable. This is the fifth year of the economic downturn in the ag sector.