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2,0/,/ F3/3 lit-c--‹ 1 C BRANN, Aura tte Federal Reserve Bank of Chicago - • November 13, 1970 FARM DEBT by year-end is likely to total around $60 U. S. EEP billion. This would be about 8 percent higher than the year 1:111P.P.1. before and nearly three times the amount outstanding in 1960. Non-real estate debt outstanding is expected to account for the NOV bulk of the increase, although farm real estate debt will also post a gain. 27 CURRF.:13 sEnin REC Real estate debt outstanding at institutional lenders through midyear was up only about 1 percent from the comparable period in 1969. Banks and life insurance companies actually showed small reductions in the amount of farm mortgag6 debt held, while federal land banks were up about 7 percent. Individuals have stepped up their participatiorrin-real estate financing in recent years and will likely account for the bulk of the increase in total real estate debt outstanding in 1970. Although reliable estimates are not available on the amount of credit extended by individuals, numerous surveys indicate that it has increased markedly in 1970. Non-real estate credit, in contrast to mortgage debt, continued to expand rapidly through 1970 to date. At midyear, non-real estate farm loans outstanding at banks stood 6 percent higher than a year earlier. At production credit associations, the advance was more than 17 percent from mid-1969. • Significant shifts in sources of farm credit have occurred over past years. Perhaps one of the more striking developments has been the relative growth in noninstitutional credit,although the amount is not well documented (official statistics fail to take it fully into account). Seller financing has long been an important feature of the farm real estate market and has become increasingly important in recent years, reflecting the joint effects of general inflation, inflated land prices, credit restraint, and certain features of the federal income tax. Department of Agriculture estimates in early 1970 indicated individual sellers were financing around three-fifths of the farmland transfers, compared with less than half in 1969 and only 42 percent in 1960. Number 1091 ',-stitutional lenders-up from 32 percent in 1960. Over the same period, the portion held by insurance companies dropped from 39 percent to 34 percent. The amount held by banks was unchanged. Non-Real Estate Farm Loans January 1 year 1960 1965 1969 1970 1970* Federal Production Farmers Intermediate Credit Home Credit Association Admin. Banks (dollars in millions) Banks 4,819 72% 6,990 70 9,720 67 10,329 65 11,233 64 1,361 2,278 3,826 4,533 5,359 20% 23 26 29 30 398 644 822 785 785 6% 6 6 5 5 90 125 180 218 251 1% 1 1 1 1 Total 6,668 10,037 14,548 15,865 17,628 *June, preliminary Real Estate Farm Loans January 1 year 1960 1965 1969 1970 1970* Banks 1,631 2,669 3,857 4,000 4,039 23% 24 24 24 23 Federal Life Farmers Land Insurance Home Banks Cos. Admin. (dollars in millions) 2,335 3,687 6,081 6,713 6,994 32% 33 38 40 40 2,820 4,288 5,764 6,734 5,637 39% 38 36 34 32 439 6% 619 6 494 3 455 3 780 5 Total 7,225 11,263 16,196 16,902 17,450 *June, preliminary. A similar development appears to be taking place in nonreal estate farm credit. Merchant-dealer credit extended to farmers appears to be increasing relative to total non-real estate credit. A number of the major manufacturers of farm machinery are reported to have greatly increased their loans outstanding on sales of farm machinery in recent years. Supplier-financing of fertilizer, petroleum products, and feeds also has been enlarged. The expansion of such credit no doubt reflects in large part the rapid growth in purchased farm production items. Expenditures on such items jumped nearly twofifths since 1960. • Marked shifts in the proportion of farm credit supplied by the various institutional lenders also have been taking place. The cooperative lenders-federal land banks and production credit associations-have shown the largest relative increases in credit advanced, while other types of lenders have generally declined in importance. Federal land banks now account for around 40 percent of the farm real estate credit held by in- Commercial banks have accounted for the largest share of the increase in non-real estate loans since the early 1960s, as well as for the bulk of the total non-real estate loans outstanding among institutional lenders. But production credit associations have shown a much more rapid rate of growth and, as a result, have steadily enlarged their share of the totalfrom around 20 percent in 1960 to nearly 30 percent this year. Credit conditions in recent years no doubt have exerted considerable influence on these trends. Although the shifts in farm credit sources have been underway for some time, it appears that they have accelerated since about the mid-1960s. High interest rates and state usury laws certainly have had their effects on the participation by some lenders in financing agriculture-chiefly insurance companies and individuals. Roby L. Sloan Agricultural Economist FARM BUSINESS CONDITIONS ITEMS 1970 September 1969 August September 2.81 20.39 30.76 5.79 .71 .13 .39 341 114 133 71 117.2 136.0 1.52 1.46 .74 2.18 2.79 22.75 30.81 5.57 .71 .13 .33 337 136.17P p 134.13 114 128 73 113.6 129.3 1.31 1.24 .63 2.08 2.49 25.89 29.75 5.68 , .70 .16 .41 307 7 _ 132.84 PRICES Received by farmers, U.S.(1957-59=100) Paid by farmers, U. S.(1957-59=100) Parity price ratio (1910-14=100) .... Wholesale, all commodities (1957-59=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.) Grain Sorghum, No. 2 yellow,. Kansas City (dol. per cwt.) . Soybeans, No. 1 yellow, Chicago (dol. per bu.) • Hogs, barrows and gilts, Omaha (dol. per cwt.) Beef steers, choice grade, Chicago (dol per cwt.) Milk, wholesale, U. S.(dol per cwt.) Butterfat, U. S.(dol. per lb.) Broilers, live, U. S.(dol. per lb.) Eggs, 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) 116 134 72 117.8 136.6 1.67 1.52 .79 2.29 PRODUCTION 166.0P 143 168.9 123 173.9 143 811.8P 44.6 806.4 45.3 763.1 43.8 3.5 74.7 3.8 76.1 3.6 74.4 Demand deposits: Agricultural banks (1957-59=100) Nonagricultural banks (1957-59=100) 139.4 136.3 139.9 129.4 138.3 127.5 Time deposits: Agricultural banks (1957-59=100) Nonagricultural banks (1957-59=100) 371.6 340.8 368.6 335.7 338.0 Industrial, physical volume (1957-59=100) Farm marketings, physical volume (1957-59=100) INCOME PAYMENTS Total personal income, U. S.(annual rate, bil. dol ) Cash farm income, U. S.1 (annual rate, bil. dol.) EMPLOYMENT Agricultural (millions) Nonagricultural (millions) FINANCIAL (district member banks) 1 Based on estimated monthly income. Preliminary. Compiled from official sources by the Research Department, Federal Reserve Bank of Chicago.