3Q farm income dips, says Agricultural Finance Monitor survey
While the drought continues to dampen expectations of farm income potential across much of the Midwest and MidSouth, agricultural lenders expect crop insurance and higher crop prices to help mitigate much of the impact.
In addition, farmland values across the entire region continued to rise throughout most of the District, according to third quarter survey results from the Federal Reserve Bank of St. Louis.
The Agricultural Finance Monitor survey, conducted from September 15 through September 28, was based on the responses of 75 agricultural banks located within the boundaries of the Eighth Federal Reserve District, which is comprised of all or parts of the following seven Midwest and Mid-South States: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. The District is broken into four zones: Little Rock, Louisville, Memphis and St. Louis. For this survey, an agricultural bank is defined as a bank for which at least 15 percent of its total loans out- standing finances agricultural production or purchases of farmland, farm equipment, or farm structures.
Since this is only the second such survey conducted for the Eighth District, historical trends and other factors such as potential seasonal irregularities were not available for evaluation and comparison. Its results should be interpreted carefully and not be used to draw conclusions about longer-term trends. Farm Income Expectations.
Overall, responses from District bankers suggest that farm income and capital spending were significantly lower in the third quarter 2012 compared with third quarter 2011. Based on a diffusion index methodology with a base of 100 (results above 100 indicate proportionately higher lender estimates compared with the same quarter a year earlier; results lower than 100 indicate lower lender estimates), the third quarter index value stood at 80, compared with 140 for the second quarter 2012.
Looking forward, lender expectations were lower for the fourth quarter, with an average Eighth District expectations index value of 77.