US farmer incomes fall as crop and livestock prices decline

The U.S. farm economy extended its slide in the third quarter amid slumps in grain and livestock prices, and bankers had a dour outlook for farm incomes in the fourth quarter, said a quarterly report from the Federal Reserve Bank of St. Louis.
 

The third-quarter survey from the bank, released on last Thursday, showed that bankers surveyed forecast that farm households were continuing to cut back on both household expenses and capital spending for their operations - and were expected to keep trimming costs in the coming months.
 

The rural economy has been hit by recent bumper harvests that have pushed grain prices to five-year lows and by a strong dollar that has hurt exports.
 

As a result, farmers have curtailed spending on their businesses, which has sent ripple effects across the agricultural sector and affected everyone from tractor makers to seed companies.
 

The USDA projected farm incomes this year would drop by 36 percent from 2014 to $58.3 billion because of declining crop and livestock prices. The forecast is down 20 percent from the USDA's February estimate of $73.6 billion.
 

The St. Louis bank survey found a larger percentage of bankers reported a drop in farm income during the third quarter of 2015, compared with a year earlier. The rest of the year also shows signs of trouble, according to the report, as bankers grow concerned about the fall harvest and the recent cooling of livestock prices.
 

As the farm economy continues to sour, bankers said they expected to see a "modest" uptick in loan demands in the fourth quarter but a "sizable drop" in the rate of loan repayments among farm operators, according to the survey.
 

Values for ranchland or pastureland increased 4.7 percent in the region for the third quarter over the same period a year earlier. But cropland values dropped 2.6 percent.
 

Cash rents saw a small rebound for quality farmland in the St. Louis Fed region in the third quarter, turning up a modest 0.7 percent, while ranchland or pastureland grew 2.5 percent.
 

But the survey cautioned that cash rents on such lands - as well as farmland values in general - were expected to decline in the fourth quarter, although quality farmland could fall more dramatically than ranchland.