Executive Summary

This quarter's survey asked Eighth District agricultural bankers about financial conditions in the first quarter of 2019. For the twenty-first consecutive quarter, a majority of agricultural bankers in the Eighth Federal Reserve District reported that farm income had declined compared with the same quarter a year earlier. However, some bankers expect farm income to improve in the second quarter. Bankers reported some erosion in land values in the first quarter, as quality farmland values declined 0.3 percent and ranchland or pastureland values declined 3.3 percent from a year earlier. Cash rents for quality farmland rose slightly in the first quarter, while cash rents for ranchland or pastureland fell appreciably. Proportionately more bankers reported an increase in loan demand in the first quarter, but, on balance, bankers expect no change in the demand for loans in the second quarter. On average, interest rates increased modestly across the three major loan categories in the first quarter compared with three months earlier. We posed two special questions to our agricultural bankers for this survey. The first question asked the bankers what percentage of their customers have borrowed up to their loan limit. The results showed that 35 percent of bankers reported that less than one-fourth of their customers had borrowed up to their loan limit, but 31 percent reported that more than half of their customers had borrowed up to their loan limit. The second special question asked the bankers to assess the most significant risk to the farm sector in 2019. Perhaps not surprisingly, a little less than two-thirds of the respondents indicated that an adverse trade outcome presents the most significant risk to the farm sector this year. Rising interest rates and declining land prices were generally not viewed as significant risks to the farm sector in 2019.