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KC Fed: Farm income decline boosts loan demand

corn-wymore 8-14Agricultural bankers in the Federal Reserve’s seven-state Tenth District—the Kansas City district—saw an increased demand for farm operating loans in the third quarter amid further declines in farm income.

Bankers participating in the district’s quarterly survey of ag credit conditions noted that reduced working capital for crop producers contributed to a rise in the need for short-term loans to the farm sector. In fact, 55 percent of bankers surveyed reported a modest deterioration in the level of working capital for crop producers in their lending area relative to last year, and ten percent reported a significant deterioration.

The bankers also report a considerable slowdown in cropland value gains. Nonirrigated and irrigated cropland values declined modestly from last quarter and were hovering just above year-ago levels by 1 percent and 2 percent, respectively.

About a third of agricultural bankers in the survey expect cropland prices to decline further, while less than five percent anticipate value gains. Ranchland values, however, were still rising, although at a slower pace than in the past several years.

The Fed’s Tenth District covers includes Nebraska, Kansas, western Missouri, Colorado, Oklahoma, New Mexico and Wyoming.

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