Farm income, farm household spending and capital equipment expenditures all declined in the fourth quarter relative to the same period a year earlier, according to a survey of ag bankers in the Federal Reserve Bank of St. Louis (covering all or parts of Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee).

 

District-wide land value changes compared to previous year

• Pastureland/ranchland: -2.6%

• Farmland: +0.8%

 

District-wide changes in average cash rents compared to previous quarter

• Pastureland/ranchland: -2.1%%

• Farmland: +3.6%

 

District-wide average interest rates compared to previous quarter

Fixed rate

• Operating: 5.24%, down 0.11%

• Intermediate-machinery loans: 5.55%, down .04%

• Farm real estate: 5.36%, up .06%

 

Variable rate

• Operating: 4.95%, down .05%

• Intermediate-machinery loans: 5.20%, up .13%

• Farm real estate: 4.88%, up .01%

 

According to the latest Agricultural Finance Monitor, average quality farmland values were little changed from one year ago (+0.8%). However, a majority of bankers expect quality farmland prices to soften in the first quarter of 2015 compared with a year earlier.

Pastureland presents a somewhat different story: While the average value declined 2.6% from one year ago, bankers are largely divided about future values.

Cash rents for quality farmland increased on average 3.6% from one year ago. However, proportionately more bankers see downward pressure on farmland cash rents over the next three months. As with the trend in pastureland values, respondents reported a decline in pastureland cash rents: 2.1% lower than one year ago.

In the fourth quarter, a modestly larger proportion of bankers reported an increase in loan demand relative to the same period a year ago. Bankers are equally divided, however, on their views of loan demand over the next three months relative to a year ago. By contrast, a larger number of bankers expect that loan repayment rates will fall in the first quarter relative to a year ago.

Changes in average interest rates on fixed- and variable-rate loans in the fourth quarter of 2014 were mixed. Interest rates on farm operating loans declined slightly, while the rates for farm real estate credit rose somewhat. The pricing of machinery loans reflects a rise in variable-rate loans, while fixed-rate loans declined slightly.

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