Headlines
Farm Financial Outlook Improves
Third Quarter National Survey of Terms of Lending to Farmers: Fewer Loans Issued to Farmers Limit Lending Activity
A slower pace of farm financing activity continued in the third quarter according to the National Survey of Terms of Lending to Farmers. Read more in the Ag Finance Update.
Ag Symposium Research: The Roots of Agricultural Productivity Growth
This year's Agricultural Symposium, titled "The Roots of Agricultural Productivity Growth," was cancelled due to the pandemic, but the topic of productivity growth in agriculture remains relevant. Papers written in anticipation of the 2020 symposium are now available as part of Agricultural Symposium Research.
Outlook for Agriculture: U.S. and 5th District
As part of the Richmond Fed's Investing in Rural America Week, Nate Kauffman provided an outlook for U.S. and Fifth District agriculture. View the presentation.
Pandemic Adds Pressure to Farm Finances
The effects of the COVID-19 pandemic continued to pressure the agricultural economy and weighed on farm finances in the Tenth District, according to the Kansas City Fed’s quarterly Agricultural Credit Survey.
Ag Finance Updates
November 24, 2020
Farm income and loan repayments rates recovered from sharp declines in the second quarter, and demand for credit softened according to Federal Reserve District Ag Credit Surveys. Although farm income generally remained low, rates of loan repayment stabilized, and farmland real estate markets remained strong.
Farm loan demand moderated in all Federal Reserve districts for the first time since 2013 in the third quarter. Although a majority of bankers in the Dallas District have reported lower lending activity since 2016, the third quarter was the first time in seven years that bankers reported a decline in the credit needs of farm borrowers in all districts.
Read more in the Ag Finance Update article Ag Credit Conditions Recover in the Third Quarter.
October 2, 2020
Farm debt at commercial banks contracted in the second quarter of 2020 following a recent trend of slower agricultural lending activity. The 1% decrease in total outstanding loans was driven by a drop in both farm real estate and production loans. Farmland loans declined less than 1%, but it was the first decrease during any quarter in more than 35 years. Non-real estate loans declined by more than 2%, marking the fourth consecutive quarter of contraction.
October 2, 2020
Alongside ongoing weaknesses in the agricultural economy and additional headwinds for many producers resulting from the pandemic, the share of non-performing agricultural loans continued to trend higher. Delinquency rates on farm loans remained manageable, but on a seasonally adjusted basis, have increased both annually and quarterly in every reporting period since the end of 2015. Compared to the second quarter of 2015, the volume of total non-performing farm loans was nearly 120% higher, while total debt outstanding at commercial banks grew by only 11%.
COVID-19 Updates & Key Demand Drivers for Agriculture
June 22, 2020
The USDA announced details of the Coronavirus Food and Aid Program (CFAP) in May and allocation of support is expected to be more heavily directed towards the livestock sector. Assistance was made available to producers of agricultural commodities with a price decline of at least 5 percent due to the pandemic and those facing increased marketing costs for inventories resulting from unexpected surplus and disrupted markets. On average, corn, soybean, and wheat farmers are expected to receive payments equal to about 5 to 10 percent of market price on half of 2019 production, or 2 to 5 percent of support on their entire crop. Aid for livestock producers, however, is expected to be comparably higher. Payments to cattle producers could amount to 20 percent of the average price received for cattle, while support for hog producers could be as high 30 percent.
June 22, 2020
Amid the global economic contraction, increases in U.S. agricultural exports have been limited, particularly with respect to China. Growth in trade with China, a key source of demand for many major U.S. agricultural commodities, remained subdued through April. Exports to China increased about 18 percent from the same period a year ago, but remained well below levels reached during this time in 2017. Exports to all other destinations remained slightly higher than 2017, but the increase was not enough to offset the reduction in exports to China.
June 22, 2020
Ethanol production declined sharply in late March and appears likely to remain subdued in the coming months. In the midst of developments surrounding COVID-19, ethanol production declined 6 percent in March and 45 percent in April from year-ago levels. Activity rebounded slightly in May, but remained 34 percent lower than a year ago. Although more recent estimates point to a slightly stronger recovery in the outlook for 2021, expectations as of June remain below levels forecasted in March. Lower ethanol production will reduce demand for corn in 2020 and the June projections also suggest the effects of the pandemic on ethanol and corn markets could last longer than previously anticipated.
June 22, 2020
All previously idle meat packing plants have reopened, but effects of COVID-19 continued to impede supply chain functions. The first outbreak of COVID-19 in the meat packing industry occurred on March 31, 2020, at a beef packing plant in Pennsylvania. Since then, almost half of plants that reported an outbreak closed for some period of time. In fact, most facilities that did close were shut down for more than one week. As of June 22, 2020, all beef, pork, and poultry packing plants that had closed due to COVID-19 were reopened and operating. However, the magnitude and duration of closures and ongoing concerns about the spread of the virus has raised questions about implications for meat production and the supply chain moving forward.
June 22, 2020
Capacity utilization at meat packing plants increased slightly since early May, but appeared to remain slightly limited by modified operations. After declining sharply alongside closures, the percent of total capacity being used at U.S. beef and pork plants expanded as facilities reopened. Despite fewer plant closures, modified operations related to social distancing and other precautionary measures have continued to impact overall production capabilities. Through the third week of June, beef and pork plants were utilizing about 95 percent and 92 of pre-pandemic capacity, respectively.
June 22, 2020
Alongside reduced operational capacity at packing plants, meat production continued to lag 2019 levels. As packing plants reopened, daily slaughter of cattle and hogs increased from lows reached in early May. However, both beef and pork production remained more than 5 percent lower than a year ago during the first week in June. It appeared that modified operations and revised processes related to COVID-19 have continued to put some constraints on production, even as plants have resumed operations.
June 22, 2020
Compounding the challenges facing U.S. meat supply chains related to COVID-19 outbreaks at packing plants, consumers rapidly shifted purchases of food from foodservice to retail outlets in March. Foot traffic at supermarkets was roughly double that of restaurants in March and April and remained about 30 percent higher in early June. At the same time in 2019, supermarkets and restaurants had equal amounts of foot traffic. The combination of challenges caused wholesale meat prices to increase substantially and also put upward pressure on retail meat prices. Through the first part of June, prices for boxed beef cutouts remained about 10 percent higher than the beginning of the year and pork carcass cutouts had stabilized.
June 12, 2020
All previously idle meat packing plants have reopened, but effects of COVID-19 continued to impede supply chain functions. The first outbreak of COVID-19 in the meat packing industry occurred on March 31, 2020, at a beef packing plant in Pennsylvania. Since then, almost half of plants that reported an outbreak closed for some period of time. In fact, most facilities that did close were shut down for more than one week. As of June 12, 2020, all beef, pork, and poultry packing plants that had closed due to COVID-19 were reopened and operating. However, the magnitude and duration of the closures has raised questions about the implications for meat production and the supply chain moving forward.
Additional Resources
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Speeches
Nov 17, 2020 | Ag Credit Survey Webinar
Nov 6, 2020 | An Economy Disrupted
Sep 24, 2020 | Agricultural Finance Update
Sep 22, 2020 | Economic Outlook for U.S. Agriculture
Sep 2, 2020 | Agricultural Economic Outlook
Each year, the Kansas City Fed looks forward to hosting our Agricultural Symposium. Unfortunately, given the circumstances with COVID-19, we made the difficult decision to cancel this year's symposium, which was scheduled for July 30-31 in Kansas City.
We had planned to focus on agricultural productivity growth at this year's symposium. Though the agricultural sector has faced extraordinary circumstances this year, the value of exploring underlying drivers of agricultural productivity remains. As such, we will still publish papers by our lead speakers later this year, and we may continue the discussion on productivity growth in 2021.
