According to Cortney Cowley and Ty Kreitman at the Federal Reserve Bank of Kansas City, high production expenses and lower prices for commodities continue to be a one-two punch to farmer balance sheets. Also dealing a heavy blow, farm loan repayment rates declined at a faster pace than one year ago—in all reporting regions—underlining how it is more difficult for borrowers to repay loans.
Cowley and Kreitman note: “Financial conditions fell at the fastest pace in the Minneapolis and St. Louis regions. Declines were more muted in Chicago, Dallas, and Kansas City regions, which could be due to larger contributions from livestock production in those areas.”
They also shared perspective on interest rates, “Farm loan interest rates declined slightly alongside recent reductions in benchmark rates. The Federal Open Market Committee lowered the target range for the federal funds rate by 50 basis points in mid-September and interest rates on farm loans across all Districts declined by about 14 basis points, on average during the survey period in the second half of the month. In the Chicago region, interest rates fell by 40 basis points, the largest decline since the first quarter of 2020.”
Earlier this month, The American Bankers Association and the Federal Agricultural Mortgage Corporation (Farmer Mac) released their annual survey indicating only half of farmers will be profitable in 2024. That study also delineated the differing economic conditions for row crop and livestock producers.
And last week, members of the U.S. Senate Ag Committee brought attention to the financial risk farmers are facing. Sen. Cindy Hyde-Smith (R-Miss.) and Sen. John Boozman (R-Ark.) shared perspective that one in five farmers could be forced out of business without financial assistance.
