The Minneapolis Fed says farmers in the region are in solid condition. The latest Ag Credit Conditions survey covers Minnesota, Montana, and the Dakotas.
“Farmers continue to be in pretty solid condition, and this has been true since the waning period of the pandemic. We’ve seen strong commodity prices, and that’s benefited farm households quite a bit, so we’ve seen continued strong income. The incomes that we saw in the first quarter of 2023 compared to a year earlier increase on balance. We also saw increases in household spending. However, capital spending by farms, purchases of equipment and buildings, was relatively flat overall,” said Joe Mahon.
Mahon says the lack of capital spending on things like big machinery comes with two factors.
“Folks largely attributed that to supply chain issues, availability of equipment, as well as to higher interest rates that it’s going to take to finance those purchases. We did see a continued increase in interest rates - not surprising given the economic environment right now – a higher rate of loan repayment, kind of consistent with the relatively good cash position of farmers and also consistent with that decrease in loan demand. Farmers are demanding less credit because they have more cash on hand. We saw a continued increase in land values and rents from a year ago, and that’s all good news.”
Ag lenders are less optimistic for the second quarter, which we are currently in. Lenders said income could take a negative turn to the downward trend in commodity prices and persistently high input costs.
