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Agricultural FINANCE Monitor
agricultural credit conditions in the Eighth Federal Reserve District
2015 ■ Second Quarter

The thirteenth quarterly survey of agricultural credit
conditions was conducted by the Federal Reserve Bank of
St. Louis from June 15, 2015, through June 30, 2015. The
results presented here are based on the responses from
39 agricultural banks within the boundaries of the Eighth
Federal Reserve District.1 The Eighth District includes all
or parts of seven Midwest and Mid-South states. These
data are not adjusted for any seasonal patterns. Accordingly,
users are cautioned to interpret the results carefully. Users
are also cautioned against drawing firm conclusions about
longer-run trends in farmland values and agricultural lending conditions.2

Executive Summary
Measured from a year earlier, values for ranch or pastureland exhibited positive growth in the second quarter of
2015, while quality farmland values were largely unchanged
in the second quarter of 2015. In comparison, both measures recorded declines in the previous survey. Cash rents
declined for both quality farmland (6.4 percent) and ranch
or pastureland (5.2 percent) as compared with the same
time last year. Bankers expect both land values and cash
rents for quality farmland to decline in the next three
months. Farm income continues to weaken according to a
strong consensus among bankers. Household spending and
expenditures on capital goods for farmers and ranchers also
continued to decline in the second quarter. All of these variables, as well as the rate of loan repayment, registered the
lowest index values yet seen over the brief history of our
survey. Bankers expect these downward trends to continue
for the next three months. Interest rates, both variable and
fixed, declined across most loan products, with the exception of fixed rates for farm real estate loans. As indicated
by responses to a set of special questions, the agricultural
sector appears to be coping well with a period of weakening farm income growth. However, the average District

Selected Quotes from Banker Respondents
Across the Eighth Federal Reserve District
“Cattle prices are good and herds are beginning to be rebuilt. Poultry
firms are expanding production of all types.” (Arkansas)
“Payments associated with the 2014 Farm Bill will probably be too
little and too late to head off severe financial damage to most grain
operations. Lenders, suppliers, and equipment dealers will also be
adversely affected.” (Arkansas)
“Our trade area is primarily cash grain and the lower grain prices will
have a negative impact on farm income, prompting producers to
reduce spending for both business and household. The past few
years have been good income years and most producers have some
working capital built up and have reduced debt from continued pay
down. The demographics of our customer base (not many young
farmers) result in a mindset of paying down debt and being less
aggressive for expansion and incurring new debt. The current cash
flows are more typical of farm operations (historically) and the past
few years have been above the norm for cash grain operations. I
would expect cash grain to continue to be slightly above breakeven
for the next few years.” (Illinois)
“This crop season is a disaster in northeast Missouri because it rains
every day. Farmers that are conservative will survive, but the young
farmers just starting out with a lot of payments will be in trouble.”
(Missouri)
“Excessive moisture has severely delayed and/or prevented planting
of soybean crop. Almost no hay has been baled. Wheat harvest will
soon be affected. All these factors will likely negatively affect farm
income this year and next.” (Missouri)
“Strong cattle prices are definitely helping repayment ability of area
farmers.” (Missouri)
“Farm segment remains solid and in good condition. Future
prospects remain encouraging.” (Tennessee)
NOTE: These are generally verbatim quotes, but some were lightly edited
to improve readability.

The survey is produced by staff at the Federal Reserve Bank of St. Louis: Gary Corner, Senior Examiner, Bank Supervision and
Regulation Division; and Lowell R. Ricketts, Senior Research Associate, and Kevin L. Kliesen, Business Economist and Research Officer,
Research Division. We thank staff at the Federal Reserve Bank of Kansas City for initial and ongoing assistance with the agricultural
credit survey.
If you have comments or questions, please contact Kevin Kliesen at kevin.l.kliesen@stls.frb.org.
The Eighth Federal Reserve District is headquartered in St. Louis and includes branch offices in Little Rock, Louisville, and Memphis;
the District includes the state of Arkansas and portions of Illinois, Indiana, Kentucky, Mississippi, Missouri, and Tennessee.
© 2015, Federal Reserve Bank of St. Louis. Views expressed do not necessarily reflect official positions of the Federal Reserve System.

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 2

In the survey, bankers were asked two types of questions: (i) estimates of current dollar values and interest rates and (ii) expectations for
future values. Dollar values and rates refer to the second quarter of 2015. Regarding expectations for future values, bankers were asked
whether they expect values to increase, decrease, or remain constant (either relative to a year ago or relative to current values; see table
descriptions). A “diffusion index” value was then created for “income and expenditures” and for the 3-month trends in “land values” and “cash
rents” (per acre). The diffusion index was created by subtracting the percent of bankers that responded “decrease” from the percent that
responded “increase” and then adding 100. Index values from 0 to 99 indicate overall expectations of decreasing values; index values from
101 to 200 indicate overall expectations of increasing values; and an index value of 100 indicates an even split.
The results reported in these tables refer to the entire Eighth Federal Reserve District.

Table 1

Table 2

Income and Expenditures (versus year-ago levels)

Land Values and Cash Rents (year/year change)

Index value
Farm income
2015:Q2 (actual)
2015:Q3 (expected)

31
35

Household spending
2015:Q2 (actual)
2015:Q3 (expected)

76
71

Capital spending
2015:Q2 (actual)
2015:Q3 (expected)

48
49

NOTE: Actual and expected values for indices use all responses from the
2015:Q2 survey.

agricultural bank has a small share of borrowers that need
to resolve repayment problems and/or have lost access to
their lines of credit due to deteriorating financial conditions.

Percent or
index value
Land values
Quality farmland
Expected 3-month trend
Ranchland or pastureland
Expected 3-month trend

0.5%
68
3.2%
100

Cash rents
Quality farmland
Expected 3-month trend
Ranchland or pastureland
Expected 3-month trend

–6.4%
80
–5.2%
100

NOTE: Changes in land values and cash rents are calculated using a
common sample of respondents for the most recent survey as well as
the survey conducted a year ago. Expected trends of land values and
cash rents are calculated using all responses from the 2015:Q2 survey.
Expected trends are presented as a diffusion index; see note above for
details about interpreting diffusion indexes.

Survey Results
Farm Income and Expenditures
Table 1 shows that, for the fourth consecutive survey,
a much larger percentage of bankers reported that farm
income declined in the second quarter of 2015 compared
with the same period a year earlier (index value of 31). In
fact, bankers’ assessments were so overwhelmingly negative
that the index value reached its lowest level in the short history of this survey (see Figure 3). A similar share of respondents expect that farm income will continue to decline in
the third quarter (index value of 35). [NOTE: Numbers in
parentheses indicate diffusion index values, unless otherwise noted.]
Consistent with the steady deterioration of farm income,
bankers also reported declines in both household expenditures and capital spending by farmers and ranchers. Similarly, the indexes of both household spending (76) and

capital equipment expenditures (48) also registered their
lowest levels since our survey began. This suggests a strong
consensus among bankers that farm household and capital
goods expenditures were down from the same time last
year. Table 1 also indicates that a similar share of respondents expect that farm household spending (71) and capital
expenditures (49) will decline further in the next three
months. Readers are cautioned that farm income is highly
volatile and subject to seasonal patterns that occur in the
agricultural sector.

Current and Expected Land Values and Cash Rents
The four-quarter percentage changes in land values and
cash rents are reported in Table 2.3 Land values for ranch
or pastureland increased from levels seen during the second
quarter of last year. The change in the value of quality

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 3

Figure 1
Year-Over-Year Change in Average Eighth District Land Values
Percent Change
20
15
10
5
0
–5
–10

2013:Q2 2013:Q3 2013:Q4 2014:Q1 2014:Q2
Quality Farmland

2014:Q3 2014:Q4

2015:Q1 2015:Q2

Ranchland or Pastureland

NOTE: Percent changes are calculated using responses only from those banks reporting in both the
past and the current quarters.

Figure 2
Year-Over-Year Change in Average Eighth District Cash Rents
Percent Change
15
10
5
0
–5
–10

2013:Q2 2013:Q3 2013:Q4

2014:Q1 2014:Q2

Quality Farmland

2014:Q3 2014:Q4

2015:Q1

2015:Q2

Ranchland or Pastureland

NOTE: Percent changes are calculated using responses only from those banks reporting in both the
past and the current quarters.

farmland is relatively unchanged. This is a notable reversal
of the substantial decline in quality farmland and ranch or
pastureland values recorded in the previous survey. However, a majority of bankers expect farmland values to decline
in the third quarter of 2015 (index value of 68). In contrast,
bankers were evenly split (index value of 100) regarding
the expected change for ranch or pastureland land values
in the third quarter relative to a year ago.
Banker responses illustrate a notable decline in cash
rents—the largest recorded over the short history of the survey—in the second quarter of 2015. Quality farmland cash

rents fell by 6.4 percent in the second quarter as compared
with a year earlier. Cash rents for ranch or pastureland
also declined in the second quarter, but by a slightly lesser
amount, 5.2 percent. A slight majority of respondents expect
quality farmland cash rents to decline (index value of 80)
in the third quarter, while pastureland or ranchland cash
rents remain unchanged (index value of 100). Figures 1 and
2 show the history of year-to-year percentage changes in
land values and cash rents since the second quarter of 2013.
The decline in cash rents could stem from the recent softening in farmland values (see Figure 1) and commodity prices.

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 4

Table 3

Table 4

2015:Q2 Variables (versus year-ago levels)

Lending Conditions (versus year-ago levels)

Index value
Farm income
Expected
Actual
Difference

48
32
–16

Household spending
Expected
Actual
Difference

92
79
–13

Capital spending
Expected
Actual
Difference

48
48
0

Demand for loans
Expected
Actual
Difference

133
100
–33

Availability of funds
Expected
Actual
Difference

100
92
–8

Rate of loan repayment
Expected
Actual
Difference

83
74
–9

NOTE: All variables are reported using a diffusion index. See the note
above Table 1 for details about interpreting diffusion indexes. For comparison purposes, we compute diffusion indexes using only those
banks that responded to the given questions in both the past and the
current quarters. Components may not sum to totals due to rounding.

Outcomes Relative to Previous-Quarter Expectations
The examination of actual data relative to expectations
is an important aspect of economic analysis. Table 3 provides such an analysis for farm income, expenditures, and
several other key variables. Farm income remains under
downward pressure in the District, even more so than what
bankers expected during the previous survey (2015:Q1).
Within a common sample of bankers between the two surveys, a significant majority (index value of 48) expected
farm income levels to fall, but a greater share (index value
of 32) actually reported declines in the second quarter.
Figure 3 shows that this is not only the lowest index value
in the history of the survey but also an unusually large

Index value
Demand for loans
2015:Q2 (actual)
2015:Q3 (expected)

115
112

Availability of funds
2015:Q2 (actual)
2015:Q3 (expected)

97
100

Rate of loan repayment
2015:Q2 (actual)
2015:Q3 (expected)

85
76

NOTE: Demand for loans, availability of funds, and rate of loan repayment are reported using a diffusion index. See the note above Table 1
for details about interpreting diffusion indexes. Actual and expected
values for indices use all responses from the 2015:Q2 survey.

negative surprise for bankers. Possibly due to the greater
extent of declining farm income, reports of actual household spending levels (79) fell short of expectations (92). The
substantial decline in actual capital spending that bankers
expected in the previous survey was realized—as reflected
in the same index value for both (48). Bankers surveyed in
the previous quarter expected a surge in loan demand (133),
but actual demand in the second quarter was unchanged
(100). On the supply side, a modest majority of bankers
reported that there were less loanable funds available (index
value of 92) than previously expected (100). Farmers and
ranchers are having a harder time meeting their financial
obligations as represented by loan repayment rates falling
(74) below expectations (83) from the previous survey. As
seen in Figure 8, the index of loan repayment rates in three
of the past four quarters was the smallest since the survey
began in the third quarter of 2012.

Financial Conditions
Table 4 reports our survey respondents’ assessment of
current and prospective bank lending conditions in the
Eighth District. The actual index values reported in Table 4
may differ from those reported in Table 3 because Table 4
uses all responses to the 2015:Q2 survey, instead of a common sample between the current and previous surveys.
The most notable difference between the samples is that
bankers from the current survey reported slightly greater
loan demand (115) in the second quarter relative to a year
ago. A similar share of these bankers expect greater loan

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 5

NOTE: All variables in Figures 3 through 8 are reported using a diffusion index. See the note above Table 1 for details about interpreting diffusion indexes. For comparison purposes, we compute diffusion indexes using only those banks that responded to the given questions in both the past and the current quarters. Expected
values for indices in 2015:Q3 are calculated using only the responses from the 2015:Q2 survey.

Figure 3
Farm Income: Expected and Actual Values
Diffusion Index, versus Year-Ago Levels
120
110
100
90
80
70
60
50

Actual

Expected

40
30

2012
Q3

2012
Q4

2013
Q1

2013
Q2

2013
Q3

2013
Q4

2014
Q1

2014
Q2

2014
Q3

2014
Q4

2015
Q1

2015
Q2

2015
Q3

2014
Q3

2014
Q4

2015
Q1

2015
Q2

2015
Q3

2014
Q3

2014
Q4

2015
Q1

2015
Q2

2015
Q3

Figure 4
Household Spending: Expected and Actual Values
Diffusion Index, versus Year-Ago Levels
130
120
110
100
90
80
Actual
70

2012
Q3

2012
Q4

Expected
2013
Q1

2013
Q2

2013
Q3

2013
Q4

2014
Q1

2014
Q2

Figure 5
Capital Spending: Expected and Actual Values
Diffusion Index, versus Year-Ago Levels
130
120
110
100
90
80
70
60
50

Actual

Expected

40
2012
Q3

2012
Q4

2013
Q1

2013
Q2

2013
Q3

2013
Q4

2014
Q1

2014
Q2

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 6

NOTE: All variables in Figures 3 through 8 are reported using a diffusion index. See the note above Table 1 for details about interpreting diffusion indexes. For comparison purposes, we compute diffusion indexes using only those banks that responded to the given questions in both the past and the current quarters. Expected
values for indices in 2015:Q3 are calculated using only the responses from the 2015:Q2 survey.

Figure 6
Demand for Loans: Expected and Actual Values
Diffusion Index, versus Year-Ago Levels
140
130
120
110
100
90
80
Actual
70

2012
Q3

2012
Q4

2013
Q1

2013
Q2

2013
Q3

2013
Q4

2014
Q1

2014
Q2

2014
Q3

2014
Q4

2015
Q1

Expected
2015
Q2

2015
Q3

Figure 7
Availability of Funds: Expected and Actual Values
Diffusion Index, versus Year-Ago Levels
140

Actual

135

Expected

130
125
120
115
110
105
100
95
90

2012
Q3

2012
Q4

2013
Q1

2013
Q2

2013
Q3

2013
Q4

2014
Q1

2014
Q2

2014
Q3

2014
Q4

2015
Q1

2015
Q2

2015
Q3

Figure 8
Rate of Loan Repayment: Expected and Actual Values
Diffusion Index, versus Year-Ago Levels
120

Actual

115

Expected

110
105
100
95
90
85
80
75
70

2012
Q3

2012
Q4

2013
Q1

2013
Q2

2013
Q3

2013
Q4

2014
Q1

2014
Q2

2014
Q3

2014
Q4

2015
Q1

2015
Q2

2015
Q3

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 7

Table 5

Table 6

Interest Rates (%)

Special Questions
2015:Q2

2015:Q1

Change

Operating
Fixed
Variable

5.37
4.96

5.45
5.09

–0.08
–0.14

Machinery/
intermediate-term
Fixed
Variable

5.56
5.14

5.64
5.16

–0.07
–0.02

Farm real estate
Fixed
Variable

5.22
4.79

5.15
4.87

0.07
–0.08

NOTE: For comparison purposes, we calculate interest rates in both
periods using a common sample of banks that responded to the given
questions in both the past and the current quarters. Components may
not sum to totals due to rounding.

demand (112) in the third quarter. While the availability
of loanable funds was down slightly in the second quarter
(97), bankers expect levels in the next three months to be
unchanged from a year ago (100). A worrisome development is that bankers expect the rate of loan repayment to
slow further (76) in the third quarter. This is consistent with
the significant decline expected for farm income over the
same period (see Figure 3).
Table 5 presents average interest rates on fixed- and
variable-rate loan products in the second quarter of 2015
as compared with the rates reported in the first quarter of
2015. Overall, interest rates declined across the majority of
loan products. The average interest rate for variable-rate
products declined across all three categories of loan products, from a low of 2 basis points (machinery/intermediateterm) to a high of 14 basis points (operating). Fixed interest
rates also declined by close to 8 basis points for both operating and machinery/intermediate-term loans. Average fixed
interest rates for farm real estate loans—the lone exception
to the general downward trend—increased by 7 basis points.

Special Questions
Table 6 reports the results of two special questions we
posed to our bankers for this survey. As substantiated by
the general survey results, the District agribusiness industry
continues to weather the ongoing decline in farm income
and the resulting widespread cuts in expenditures by farm
households and farm and ranch operations. A general
worsening in the farm outlook would also be expected to

What percentage of your bank’s farm loan portfolio currently
falls into the following repayment classifications?
Average of responses
No significant repayment problems
Minor repayment problems that can be
remedied fairly easily
Major repayment problems requiring more
collateral and/or long-term workouts
Severe repayment problems which will likely result
in loan losses and/or require forced sales of
borrower’s real assets

85.9
9.1
4.5
0.5

For instances where the borrower’s operating line of credit
was not renewed this year, the primary reason was?
Share of total respondents
The customer voluntarily reduced or exited farm
operations
The borrower’s financial condition declined
significantly and no longer met existing bank credit
standards
The borrower’s financial condition was relatively
unchanged but did not meet tightened bank credit
standards
All operating lines were renewed this year

12.5
15.6

3.1

68.8

increase the financial hardship for some farm operations.
Consequently, the two special questions seek to assess the
difficulty that District farmers are having meeting the terms
of their loan agreements and accessing credit from agricultural banks.
Question one: The first question asked what percentage
of a bank’s farm loan portfolio currently falls into four different repayment classifications. For the average respondent,
the majority of their farm loan portfolio (around 86 percent) has experienced no significant repayment problems.
Close to 9 percent of the portfolio has had minor repayment
problems that can be remedied fairly easily; 4.5 percent of
farm loans in the portfolio have major repayment problems,
requiring more collateral and/or long-term workouts. A
very small share (0.5 percent) of the portfolio has severe
repayment problems, which will likely result in loan losses
or forced sales of the borrower’s tangible assets.
Question two: The second special question asked for
the primary reason for not renewing a borrower’s operating
line of credit. Close to 69 percent of bankers reported that

Agricultural FINANCE Monitor

Federal Reserve Bank of St. Louis 8

the question was not relevant to them, as all operating lines
were renewed this year. For 12.5 percent of respondents,
customers voluntarily reduced or exited farm operations;
3.1 percent of banks reported that the borrower’s financial
conditions were relatively unchanged but they did not meet
tightened bank credit standards. The remaining 15.6 percent reported that the borrower’s financial conditions had
declined significantly and no longer met existing bank
credit standards.
Overall, the majority of borrowers remain in good
standing with their financial creditors—despite the relatively dour outlook in the farm sector. Still, a minor share
of borrowers are finding it difficult to meet their financial
obligations. ■

Notes
1

An agricultural bank, for survey purposes, is defined as a bank for which at
least 15 percent of its total loans outstanding finances agricultural production or
purchases of farmland, farm equipment, or farm structures. As of June 30, 2015,
there were 247 banks in the Eighth Federal Reserve District that met these criteria.

2

Readers are also cautioned that the number of responses in each zone is relatively small. Statistically, this tends to suggest that the responses in each zone
have a larger plus-or-minus margin of error than for the District as a whole. We
have eliminated the zone-by-zone responses until the response rate improves.

3

The annual percentage change in land values and cash rents are based on common responses. That is, a respondent must have been in both the 2015:Q2 and
2014:Q2 samples.

IL
Columbia
Jefferson City

St. Louis
Evansville

MISSOURI

Owensboro

Louisville-Jefferson County
Elizabethtown

Springfield
Bowling Green

Fayetteville-Springdale-Rogers
Jonesboro
Fort Smith

Jackson

ARKAN
ANSAS
AS

Memphis

Little Rock-North Little Rock
Hot Springs
Pine Bluff

Texarkana

M SSIS
MI
S SS
SIP
S
IP
PP
P
PI

Posted on August 13, 2015

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