Increasing signs of financial pressure on farmers and ranchers in the Southern Plains have tempered the rise in cropland and ranchland values, reports the Federal Reserve Bank of Kansas City. In its quarterly survey of ag bankers across its service area, the bank reports values for nonirrigated and irrigated cropland grew less than 5% from a year ago, while ranchland values held firmer and increased 6%.
The bank also notes ranchland cash rents also rebounded more sharply than rents for cropland. In the second quarter, rents for ranchland rose nearly 8% from last year. Stronger prices and profit margins for cattle could be contributing to relatively stronger markets for ranchland in the regio, the bank states.
The bank serves Kansas, western Missouri, Nebraska, Oklahoma the mountain states of northern New Mexico, Colorado and Wyoming.
In its report, the bank states: “Agricultural credit conditions tightened further in the second quarter of 2024. Alongside lower crop prices and continued pressure from elevated production expenses, farm income declined at a slightly faster pace than recent quarters, especially in states more concentrated in crop production. In addition, more agricultural banks also reported farm borrower liquidity had declined relative to last year.”
The bank notes the rise in cattle prices through mid-year, however, provided some support to farm borrowers and values for ranchland.
“Despite sharp declines in farm income and capital spending, agricultural credit stress remained limited, but signs of financial pressure have appeared,” the bank continues. “Lenders reported modest deterioration in farm finances, farm loan repayment rates declined at a gradual pace similar to recent quarters, and repayment problems on farm loans rose slightly. Any additional weakening in incomes and liquidity could increase the risk of deterioration in credit conditions.”
Looking ahead, the bank notes lenders expect land values to moderate further in the months ahead. About 80% of agricultural lenders anticipate land values to remain unchanged in the next quarter. However, for the remaining 20%, a larger share of bankers expected cropland values to decline and ranchland values to increase.