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KC FED AG CREDIT SURVEY: AG CREDIT CONDITIONS DETERIORATE FURTHER
Aug. 12, 2016
Source: Federal Reserve Bank of Kansas City news release
Agricultural credit conditions throughout the seven-state Tenth District continued to deteriorate in the second quarter of 2016 as farm income remained subdued, according to the Federal Reserve Bank of Kansas City's Survey of Agricultural Credit Conditions.
Nearly 75 percent of bankers responding to the survey reported farm income was less than a year ago. Bankers also indicated they expect farm income to remain weak in the third quarter.
Persistent declines in farm income in the District have continued to affect agricultural credit conditions. Demand for non-real estate farm loans and loan renewals continued to climb in the second quarter with additional increases expected in the third quarter. Slimmer profit margins also have pulled down the rate of loan repayments. Almost half of all respondents reported that loan repayments rates in the second quarter were lower than a year ago. In addition, the severity of repayment rate problems has increased slightly over the past year.
In response to a weakening farm economy and increased problems with loan repayments, bankers reported an increase in the share of loan applications that were denied in the second quarter. Although District bankers continued to report that ample credit was available for borrowers who are in a strong financial position, the higher rate of loan denials suggests the number of farm borrowers who are less creditworthy has increased over the past year.
Values of nonirrigated and irrigated cropland declined 3 percent and 5 percent, respectively, from a year ago. Ranchland values also declined 3 percent, continuing the downward trend of recent quarters. Many bankers indicated they expect further declines in farmland values in the months ahead.
Find the full report at www.kansascityfed.org/research/indicatorsdata/agcreditsurvey.
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