Farm incomes continue their declines in the Midwest and Midsouth. A new survey from the Federal Reserve Bank of St. Louis says that agricultural bankers in the regions reported farm incomes dropped during the fourth quarter of 2014 compared with the previous year. At the same time, the lenders reported a slight increase in quality farmland and a modest decline in pastureland values relative to a year earlier.
Noting that farm income is highly volatile and subject to seasonal patterns, the report revealed a decline in farm income, farm household spending, and capital equipment expenditures during the fourth quarter of 2014 relative to the same period a year earlier. In addition, lenders indicated they expected further declines in all three categories during the first quarter of 2015.
Based on a diffusion index methodology with a base of 100 (results above 100 indicate proportionately higher lender values compared with the same quarter a year earlier; results lower than 100 indicate lower lender values), the fourth-quarter index value for farm income was 78, while first-quarter expectations for 2015 showed an index value of 61.
“Excellent yields have helped offset lower grain prices for most producers for the 2014 crop, but future incomes are expected to be reduced based on average yields and projected prices for the 2015 crop year,” a Missouri lender noted.
The survey also showed quality farmland values across the area were up 0.8 percent during the fourth quarter of 2014 from one year ago. However, proportionately more bankers indicated they expected prices to decrease over the next three months.