Farm Economy May Be Improving Says Chicago Fed

CHICAGO, IL – Respondents to the Chicago Fed’s agricultural survey covering the fourth quarter of 2019 sounded more optimistic than a year ago. Agricultural credit conditions showed some signs of improvement in the fourth quarter of 2019. A slightly smaller percentage (2.2 percent) of current agricultural borrowers were not likely to qualify for operating credit at the survey respondents’ banks in 2020 than in 2019. Also, the index of repayment rates on non-real-estate farm loans for the fourth quarter reached its highest level since the third quarter of 2014. Non-real-estate loan demand in the fourth quarter of 2019 was above the previous year’s level, as were funds available for lending by survey respondents’ banks. Average interest rates on farm operating, feeder cattle, and farm real estate loans had moved down by the end of 2019 to levels not seen since the end of 2017. The survey results reflected some cautious optimism about agriculture’s prospects in 2020. As one Wisconsin banker stated, “Due to a recent increase in milk prices, I expect to see an uptick in capital investment that was put on hold over the last five years.” The vast majority of responding bankers (82 percent) expected farmland values to be stable in the first quarter of 2020.