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Minneapolis Fed survey reflects continued weakness in ag economy

A survey of Upper Midwestern banks that specialize in ag lending shows net farm income decreasing along with less capital spending.

Joe Mahon with the Federal Reserve Bank of Minneapolis says incomes have been declining for nearly two years in the 9^th District, which includes Minnesota, the Dakotas, and parts of Wisconsin and Michigan.

“We ask survey respondents what their expecting to happen over the next three months, and maybe unsurprisingly given everything that’s been going on in agriculture and the current levels of crop prices, the outlook for this spring is rather pessimistic at least in terms of expectations for farm income.”

He says farmers in the district continue to scale back purchases of equipment and other capital assets.

“Even though interest rates are high, still pretty strong demand for loans. And that’s consistent with less cash on hand, you need to borrow more to continue financing ongoing operations. And a downward movement in the rates of repayment on those loans.”

Mahon says other takeaways from the first quarter survey include household spending up on balance, higher land values compared to a year ago, and lower cash rents.