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F313

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Federal Reserve Bank of Chicago - August 11, 1967

DEMAND FOR AGRICULTURAL LOANS in the
Seventh Federal Reserve District continued strong during
the second quarter. This was the consensus of country
bankers responding to a recent survey of credit conditions in the District states. About half of the bankers
reported that demand for non-real estate loans-those
loans typically made to finance purchases of farm machinery, livestock and feed, and to pay taxes, wages and
other current expenses-was more active than a year ago.
Most of the remaining bankers indicated that the demand
for such loans was on a par with the high level experienced last year; only about 6 percent indicated a slackening in the demand for farm credit.
The strong demand for farm credit this year probably
can be partly attributed to increased operating costs associated with expanded crop production. Changes in the
Government's 1967 feed grain and wheat program's plus
relatively high prices during the planting season encouraged farmers to sharply expand acreage planted_ to crops.
According to U. S. Department of Agriculture estimates,
acreage planted to all crops this year is the. largest since
1960. Acreage planted to corn in the Seventh District
states was increased about 8 percent from last year and
soybean acreage is up about 4 percent.

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Higher prices for most of the items farmers buy for
use in their business have also boosted production expenses and in turn the demand for farm credit. The index
of prices paid by farmers averaged about 3.5 percent
higher than a year ago during the first five months of this
year. Nationally, outlays for farm production items during the first half of the year were about 4 percent above
the record 1966 level.
Demand for farm mortgage loans., while continuing
strong, has apparently stabilized somewhat in recent
months. About two-thirds of the bankers responding to
the recent survey reported that the volume of loans secured by farm real estate during the second quarter was
about equal to that of Idgt
. year; about 10 percent reported
a decline in the demand for such credit. These developments probably reflect, in part, the slowing of the upward
trend in land prices in recent months. Farmland prices
in the Seventh District, according to country bankers, increased about 3 percent during the first half of this year
compared with a 5 percent rise in the same period last
year.
Funds available to accommodate these credit demands apparently have been adequate in most areas, although about 12 percent of the banks reported reduced
availability of funds as compared with a year ago. Deposit growth at "agricultural" banks this year, however,
has not been as rapid as in 1966.

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Time deposits continued to rise, with sizable increases posted in each of the District states, but demand
deposits at midyear were about 1 percent lower than a
year ago. This probably reflects the reduced level of
farm income, especially in the District Corn Belt states.

ric

S.DEPT TARICILLT RE
NATIONAL A milittl!pAfliRAnY

rat
tt

'967
CURRENT

DS
Number 921

Advance in Deposits at "Agricultural" Banks Slows*
Percent change
June 1966 to June 1967
Demand
Time
Illinois
Indiana
Iowa
Michigan
Wisconsin
District

-1
-2
-2
+4
+3
-1

+14
+17
+15
+8
+12
+14

-*Agricultural banks are those located in towns of less than
15,000 population in which farm loans account for a relatively
large proportion of total loans.

Interest rates charged by country banks apparently
have stabilized at relatively high levels following several
months of sharp increases. Virtually all of the banks
were charging 6 percent or more on loans secured by farmland, and about two-thirds of the banks were charging
6.-,5 percent or more compared with around one-fourth a
year ago. Similarly, a "typical" rate on feeder cattle
loans of 6.5 percent or more was being charged by twothirds of the banks as of July 1, and slightly less than
one-fifth were charging 7 percent. The.. proportions reporting these rates were about the same as in March, but
in July 1966, about two-thirds of these banks were charging less than 6.5 percent.
Many bankers expect some slackening in farm credit
demands during the remainder of the year. About onefourth of the bankers anticipated a reduction in the demand for credit to purchase feeder cattle, probably because of the relatively poor returns in feedlot operations
during the first half of the year. However, with the recent
upward trend in fed cattle prices and the prospects for a
record corn crop, farmers may now be more interested in
increasing their feeding activities, thereby increasing
their demand for funds. About one-fifth of the bankers
also expected some slackening in the demand for machinery loans, but most bankers expected the demand for
operating loans to be higher. Loan demand for the purchase of farmland during the second half of the-year was
expected to be about on par with that of last year.
Roby L. Sloan
Agricultural Economist

FARM BUSINESS CONDITIONS
May 1967 with Comparisons
,
1966

1967
'ITEMS

,
.,

May

April

May

.10.1
117
711
106
116
1.67
1.39
.76
2.87
22.33
25.116
4.74
.65
.13
.29
259

101
116
72
106
115
1.73
1.38
.76
2.88
17.81
24.66
14.77
.66
.13
.30
257

109
1111
79
106
113
1.66
1.31
.75
3.05
23.148
26.75
4.34
.62
.16
.33
2143

__
113.52

58.75
112.56

....._
112.05

PRODUCTION:
.
Industrial, physical volume (1957-59=100)
Farm marketings, physical volume (1957-59=100)....

156
93

156
93

155
90

INCOME PAYMENTS:
Total personal income, U. S. (annual rate, bil. of dol.)
Cash farm income, U. S.1 (annual rote, bil. of dol.) .

618.2
. 41.1

616.5
45.8

576.1
41.6

3.8
69.8

3.7
69.7

4.3
69.5

118.1
118.9

121.0
118.9

119.5
116.5 '

256.8
278.8
.

252.6
273.6

227.5
2104.7

PRICES:
Received by farmers (1957-59=100)
Paid by farmers (1957-59=100)
,
Parity price ratio (19,10.14=100) , ,
Wholesale, all commodities(19M9=100)
..
.
Paid by consumers (1957-59.100)..............
. Wheat, No. 2 red winter, Chicago (dol. per bu )
Corn, No. 2 yellow, Chicago (dol. per bu.)........
Oats, No. 2 white, Chicago (dol. per bu )
Soybeans, No. 1 yellow, Chicago (dol. per bu )
Hogs, barrows and gilts, Chicago (dol. per cwt.).. • •
Beef steers, choice grade, Chicago (dol. per cwt.). • •
Milk, wholesale, U. S. (dol. per cwt.) .
Butterfat, local markets, U. S. (dol. per lb.)
Chickens, local markets, U. S. (dol. per lb.).....
Eggs, local markets, U. S. (dol. per doz)
Milk cows, U. S. (dol. per head)
Farm labor, U. S. (dol. per week without board)
Factory labor, U. S. (dol. earned per week)

,
EMPLOYMENT:
Faun (millions) .
Nonagricultural (millions)
FINANCIAL (District member banks):
Demand deposits:
Agricultural banks (1957-59.100)
Nonagricultural banks (1957-59=100)
Time deposits:
Agricultural banks (1957-59=100)
Nonagricultural banks (1957.59=100)
, .
1
Based on estimated monthly income.
/

.

Compiled from official sources by the Research Department, Federal Reserve Bank of Chicago.

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