Page 67 - July-August 2018 GSE Report Flip Book

FARM CREDIT SYSTEM / FARMER MAC JJUALN. U- ARUYG. 22001188
Meanwhile, the workforce in rural areas is aging, as the number of youth living in rural areas has diminished relative to urban locations and strongest population growth in rural areas is at retirement age. In the Kansas Fed’s U.S. Agricultural and Rural Outlook (May 2018), economist Nate Kauffman wrote:
Following a period of extraordinary profits, the U.S. agricultural economy has been in a prolonged downturn that has affected the outlook for rural communities in the region. Some rural challenges, connected to commodity markets and their cycles, are not new. Increasingly, though, a challenge for rural areas of the KC Fed District is population decline and workforce availability. (Fed’s U.S. Agricultural and Rural Outlook, Nate Kauffman, 05/08/18)
In his August 9th analysis of the KC Fed Ag Credit Survey, Kauffman added:
The farm economy in the Federal Reserve’s Tenth District dipped in
the second quarter of 2018 alongside a sharp drop in the prices of key agricultural commodities. Agricultural credit conditions also deteriorated and bankers continued to report a modest increase in problems with loan repayment. Meanwhile, elevated demand for farm loans continued to place pressure on liquidity at some agricultural banks. Despite these challenges in the District’s farm economy and additional increases in interest rates, farmland values have remained relatively steady and provided ongoing support to agricultural credit markets.
... A sharp drop in the price of corn and soybeans contributed to a bleaker view of the District’s farm economy in the second quarter. For many agricultural borrowers, cash flow already had been a significant concern, but likely was exacerbated by the recent drop in prices amid ongoing uncertainty surrounding the future for agricultural trade. Interest rates on farm loans
of all types continued to edge higher, but the value of farmland still only declined at a modest pace. If crop prices remain low through harvest, many farm borrowers likely will face additional increases in financial stress and the future path of agricultural credit conditions may hinge on the strength of farmland markets. (KC Fed Ag Credit Survey, Nathan Kauffman, 08/09/18)
U.S. farmland prices—which hit all time highs after increasing 47% from 2009 to 2017—face headwinds with rising interest rates, falling commodity prices and new tariffs. “You had a perfect storm for land values—high commodity prices and low interest rates,” said Steve Bruere, president of Peoples Company, headquartered in Clive, Iowa . “Lots of institutional capital has moved into the market since 2008 but the farmer is still the driver of the market. Farmers still buy 80 percent of everything that sells. That has kept the market strong. What has been surprising is how resilient the land market has been since 2013. We slipped off the peak, but it has remained strong. What’s
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