More than 60% of agricultural bankers participating in the Kansas City Federal Reserve's quarterly credit survey say they're concerned about steep pandemic-related declines in farm income and loan repayments.
While some borrowers are facing liquidity issues, the report says the number of farmers who refinanced to meet short-term needs is comparable to previous years, and the number of loan denials is at the lowest level since 2016.
"Farmer finances were stable for the 2019 production year but would have not maintained that position without the MFP program," a northeast Kansas banker noted in the Fed's anonymous comments.
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Across the 10-state Federal Reserve district, 90% of bankers say the Market Facilitation Program payments provided moderate support to farm income and repayment, although it was a more significant factor in Kansas, Missouri and Nebraska.
"Providing some support to farm finances, interest rates on agricultural loans declined, and farm real estate values remained relatively stable," say the report's authors, Omaha Branch Executive Nathan Kauffman and assistant economist Ty Kreitman.
Interest rates on all types of farm loans declined alongside the benchmark rate. That's particularly benefiting farm real estate, where the fixed rate on loans declined to the lowest level on record in the first quarter.
At the same time, the value of both nonirrigated cropland and ranchland increased slightly for the second consecutive period, and nearly 70% of the bankers the Fed surveyed say they expect land values to remain unchanged.
"Weaknesses in some agricultural commodity markets continued to intensify in recent weeks and further weighed on already subdued farm revenues. However, government payments appear likely to provide notable relief to segments of the farm sector again in 2020," Kauffman and Kreitman write.
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