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Agricultural Credit Conditions Weaken

Agricultural Credit Conditions Weaken

Credit conditions in the seven-state Tenth Federal Reserve District weakened as farm income declined further in the first quarter of 2015, according to the Federal Reserve Bank of Kansas City’s quarterly Survey of Agricultural Credit Conditions.

Persistently low crop prices and high input costs reduced profit margins and increased concerns about future loan repayment capacity. Funds were available to meet historically high loan demand, but collateral requirements remained the same or increased slightly for most farm loans throughout the District. Although profit margins in the livestock industry have remained stable, most bankers do not expect farm income orcredit conditions to improve in the next three months.

Amid further declines in farm income, bankers reported that Tenth District cropland values edged down in the first quarter. In fact, irrigated cropland values declined in the quarter, falling slightly below year-ago-levels for the first time in more than five years. The value of nonirrigated cropland also declined but was holding just above year-ago levels. Tenth District ranchland values generally held firm in the first quarter of 2015 and year-over-year gains remained strong.

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