Prospects for farm income and agricultural credit conditions rebounded sharply in the fourth quarter of 2020. The average price of corn, soybeans and wheat increased more than 20% from the previous quarter, and reached six year highs in December.
Farm loans outstanding at commercial banks declined in the third quarter and non-performing loans edged slightly higher. Reduced lending at agricultural banks contributed most significantly to the further decline in outstanding loan balances.
The outlook for agricultural credit conditions in the Tenth District improved in the third quarter alongside increases in commodity prices and the announcement of additional government aid.
The effects of the COVID-19 pandemic continued to pressure the agricultural economy and weighed on farm finances in the Tenth District. Farm income declined in the second quarter at the quickest pace since 2016, and weaknesses in both income and borrower liquidity were expected to carry into the coming months.
Agricultural credit conditions in the Kansas City Fed’s Tenth District and the Chicago Fed’s Seventh District slipped in the first quarter of 2020, impacted by the effects of the COVID-19 pandemic. As commodity prices drop, so has farm income, loan repayment rates and loan interest rates. At the same, farmland values have increased slightly or remained flat during the pandemic.
Agricultural credit conditions in the Kansas City Fed’s Tenth District deteriorated at a slightly faster pace at the onset of developments related to COVID-19. The survey for the first quarter of 2020, distributed in mid-March, indicated a larger decline in farm income and loan repayment rates than in recent quarters.
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