Results Of Ag Finance Survey Released

According to a new quarterly agricultural finance survey launched by the Federal Reserve Bank of St. Louis, while a strong winter wheat crop and good spring growing conditions bolstered Midwest and Mid-South farm income expectations during the first half of 2012, the summer drought has significantly lowered these expectations for the third quarter.

The survey, conducted from June 15-29, 2012, was based on the responses of 88 agricultural banks located within the boundaries of the Eighth Federal Reserve District. Since this is the first such survey conducted for the Eighth District, historical data and trends, and other factors such as potential seasonal irregularities, were not available for evaluation and comparison. Its results should be interpreted carefully and not be used to draw conclusions about longer-term trends.

The Eighth Federal Reserve District comprises all or parts of the following seven Midwest and Mid-South States: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. It is broken into four zones: Little Rock, Louisville, Memphis and St. Louis.

Farm Income Expectations – Except for the Memphis zone, lenders across the District expected third quarter 2012 farm income and capital expenditures to be significantly lower than third quarter 2011. Based on a diffusion index methodology with a base of 100 (results above 100 indicate proportionately higher lender expectations compared with the same quarter a year earlier; results lower than 100 indicate lower lender expectations), the average expectations index was 81 for the third quarter of 2012 across the Eighth District; it was 140 for the second quarter.

In the Memphis zone, which includes northern Mississippi, lenders expected slightly higher income relative to last year, as well an increase in capital expenditures, thanks to a more favorable outlook for the region’s cotton, rice and irrigated corn crops. The expectations index for the Memphis zone was 118 for the third quarter and 139 for the second quarter.

Farmland Values – By zone, quality farmland values averaged $2,878 per acre in the Little Rock zone; $4,504 per acre in the Louisville zone; $2,900 in the Memphis zone and $5,835 per acre in the St. Louis zone. Ranch and pastureland averaged $1.918 per acre in the Little Rock zone; $2,464 in the Louisville zone; $1,717 per acre in the Memphis zone and $2,691 per acre in the St. Louis zone.

Across the District, gains in quality farmland prices over the next three months were expected to outpace gains in ranch or pastureland prices, except in the Louisville zone, where gains in ranch and pastureland were expected to be higher than quality farmland.