ST. LOUIS, Feb. 13, 2014 – The greatest risks to the farm sector this year may come from lower-than-expected commodity prices, followed by higher-than-expected costs for fertilizer, fuel, and other inputs, according to a majority of 49 agricultural banks surveyed in the latest Agricultural Finance Monitor, published by the Federal Reserve Bank of St. Louis.
About 63 percent of the bankers viewed falling commodity prices as the top threat, with 15 percent pointing to input costs, and a smaller number citing unusual weather. Very few thought higher interest rates or an unexpected decline in quality farmland values pose a significant risk to farmers this year, according to the survey. The findings were in response to questions posed to bankers in eight Midwest and Southern states as part of a quarterly survey on farm income and agricultural land values.
The survey further found that farm income increased in the fourth quarter of 2013 from the same period a year earlier, and quality farmland prices in the fourth quarter also were up from a year earlier. However, the report said farm income levels in the first quarter of 2014 are expected to be lower than a year earlier.
The survey said quality farmland values across the Eighth District averaged $5,868 per acre in the fourth quarter of 2013, which was modestly higher than the third-quarter average of about $5,300 per acre. When measured against figures from a year earlier, quality farmland values in the Eighth District increased by 12.2 percent.
Farm income and household spending in the fourth quarter were roughly in line with bankers’ expectations, the survey said. Proportionately more respondents indicated that expenditures on capital equipment were less than expected in the fourth quarter.
Also, the survey said demand for farm loans in the fourth quarter of 2013 was modestly below its levels from a year ago. However, respondents said they expect demand for farm loans to pick up in the first quarter of 2014 compared with a year earlier. “There appears to be ample funds available for agricultural loans,” the survey said. Respondents reported that more funds were available to prospective borrowers in the fourth quarter than at the same time last year.
Meanwhile, USDA recently said it expects farm income to decrease by about 30 percent in 2014 as a result of lower corn and soybean prices, as well as reduced government subsidies.
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