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Kansas City Fed says Ag Income Drops, Credit Conditions Deteriorate | KTIC Radio

Kansas City Fed says Ag Income Drops, Credit Conditions Deteriorate

Kansas City Fed says Ag Income Drops, Credit Conditions Deteriorate

Agricultural credit conditions in the Kansas City Federal Reserve Bank’s Tenth District deteriorated at a slightly faster pace as the COVID-19 outbreak ramped up in the first quarter of this year.

The Fed’s survey of ag lenders during the first quarter of 2020 showed a larger decline in farm income and loan repayment rates than in recent quarters. Looking to the future, bankers say they are more pessimistic in terms of expectations. Further disruptions at meatpacking and food processing facilities, as well as a substantial slowdown in ethanol production, put heavy downward pressure on cattle and corn prices.

As of early May, cash prices for both commodities had declined more than 20 percent since January. That’s done nothing but add pressure to already stressed farm finances in seven states of the Kansas City Fed’s district. While farm income in the district weakened alongside a steep drop in agricultural commodity prices, spending by farm borrowers also weakened slightly, but less abruptly than farm income.

After showing some signs of stabilizing in previous surveys, credit conditions deteriorated quicker in the first quarter of this year. Similar to farm income, farm loan repayment rates also declined at a faster rate than in recent quarters. Almost 40 percent of banks in the district reported a decline in repayment rates compared to previous surveys.

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