Ag Struggles in 2nd Qtr, How Will the 3rd Qtr Look?

Published on: 08:01AM Oct 08, 2010

In August of this year, The Minneapolis Federal Reserve reported that the agricultural credit conditions in the second quarter were somewhat pessimistic compared to the previous quarters.  The Ninth district comprises the states of Montana, North and South Dakota, Minnesota and parts of Wisconsin and Michigan.

Although the credit conditions for this district were slightly negative, the positive trends for farmers is that they are reducing their capital investment and household spending.  During the period, only 11 percent reported higher household spending and 14 percent reported spending more on capital goods.

Demand for loans and repayment levels were fairly constant.

Cash rents continue to be strong.  Average cash rents for irrigated and non-irrigated farmland were up from a year ago by about 6 and 10 percent, respectively.  However, cash rents for range land was down about 3%.  Values for farmland were up by about 6-8% for the year earlier periods.  "Bankers are starting to get concerned over how much longer these rents and prices can stay this high", a Minnesota lender reported.

According to the report, the survey does not paint a rosy picture for the third quarter.  However, with the dramatic increases in prices during that quarter, I am betting that the actual third quarter report will be much rosier than the expectations.