Ag lenders report less than ideal conditions Agricultural financial conditions deteriorated during this first quarter in Wisconsin, Montana and western South Dakota, according to the Minneapolis Fed's first-quarter agricultural credit conditions survey. Farm income and loan repayments were down in these area. However, lender in Minnesota and North Dakota fared better during the slow winter months. Though the outlook is on the pessimistic side, the mood may be changing. This survey was conducted in March, before most of the heavy spring rains fell across much of the district.
Farm income, household and capital spending
* Half of those surveyed reported a decrease in farm income in the first quarter, while only 20 percent noted an increase.
* Overall household spending decreased: 30 percent of respondents districtwide reported lower household spending; 52 percent noted no change.
* 53 percent of lenders indicated decreased levels in capital spending, with a low of 32 percent of Minnesota lenders and a high of 100 percent of Wisconsin bankers.
Loans demand, interest rates and land values
* Overall loan demand was level during the first quarter; the number of respondents who indicated increased loan demand about equaled the number reporting decreased demand.
* Average interest rates on fives loans dropped about one-third of a percent from fourth quarter 2002 to first quarter 2003.
* District farmland and ranchland prices increased an average of 12 percent and 13 percent, respectively, from a year ago.
Agricultural income is expected to decrease in the second quarter of 2003 for all district states. Across the district, 42 percent of respondents anticipate lower income, while only 7 percent expect higher income. In Montana and western Wisconsin, two-thirds of respondents forecast decreased income. "Outlook is very poor," reported a Wisconsin lender. "Fertilizer and fuel prices will squeeze 2003 farm margins," commented a North Dakota banker.
This expected reduction in income affects other areas: 48 percent of district respondents anticipate lower levels of capital spending and 8 percent predict increased spending. In addition, loan demand, renewals and extensions are expected to increase in the second quarter of 2003.
The Federal Reserve Bank of Minneapolis' quarterly survey of 128 agricultural bankers in the Ninth Federal Reserve District included Montana, North and South Dakota, northwestern Wisconsin and Minnesota. The Upper Peninsula of Michigan is not part of the survey. Complete results are available on the Minneapolis Fed's Web site at: min neapolisfed.org/pubs/agcredit/AcQ1-03.cfm. As one of 12 regional Reserve banks that serve as the nation's central bank, the Federal Reserve Bank of Minneapolis is responsible for making and carrying out monetary policy, supervising and regulating banks and bank holding companies, and providing financial services to depository institutions and the U.S. Treasury.