Government payments, rebounding commodity prices and improved trading conditions have buoyed farm incomes for Upper Midwest farmers in the first quarter of 2021, according to a survey of Upper Midwest agricultural lenders by the Federal Reserve Bank of Minneapolis.
“There has been a big bump in farm income over the last six months,” said Joe Mahon, regional outreach director for the Minneapolis Fed, who presented the report last week. The Federal Reserve’s Ninth District covers Minnesota, the Dakotas, Montana, northwest Wisconsin and the Upper Peninsula of Michigan.
Courtesy of Federal Reserve Bank of MinneapolisBIG BUMP: Land values in the Federal Reserve’s Ninth District are up, according to a recent ag lender survey. Minnesota saw the largest increase at 10%, when comparing the first quarters of 2020 and 2021. The Upper Peninsula of Michigan was not included in the survey.
Sixty-seven ag lenders were polled in April for the survey. Most district bankers — 87% — reported that farm incomes increased in the first quarter of 2021 compared with the first quarter of 2020.
“Huge government subsidy for farmers along with increasing crop prices equals a lot of cash here right now,” a Minnesota lender wrote in a comment. “Farmers are spending again.”
More than half of respondents said capital spending by farming operations was up. Household spending was slightly more stable, as 46% reported that it had increased, while 48% reported that it remained flat in the first-quarter comparisons.
Farmland values and cash rents generally increased in early 2021, continuing a trend from recent surveys, according to the report. Overall, Ninth District nonirrigated cropland values rose on average nearly 7% from the first quarter of 2020. Irrigated land values fell slightly, around 2%.
The district average cash rent for nonirrigated land jumped by nearly 8% from a year ago. Rents for irrigated land and ranchland increased 3% and 6%, respectively.
Land values climbed the most in Minnesota, where lenders reported that nonirrigated cropland prices rose 10% from a year ago. Northwest Wisconsin saw the largest drop in land values, with nearly 15% for the same class of land. Values in North Dakota and South Dakota were more in line with district averages.
Cash rents on nonirrigated land rose the most in Wisconsin, up 24%. In Minnesota, cash rents on nonirrigated land were up 7%.
Courtesy of Federal Reserve Bank of MinneapolisJUST AVERAGE: Minnesota’s average cash-rent increase from 2020 to 2021 for nonirrigated farmland was similar to other states — the exception being northwest Wisconsin, which saw the biggest increase at nearly 24%.
Improved finances for farmers helped increase the rate of ag loan repayments, while renewals held steady, according to the survey.
“Loan demand is down significantly,” one Minnesota lender reporter.
“Half of producers have no operating loan balance right now and prepaid expenses for 2021,” another wrote.
Ag lenders were optimistic during the planting season. Across the district, nearly three-quarters of lenders predicted that farm income will increase in the second quarter of 2021, compared with 4% forecasting decreases. Nearly 70% expect growth in capital spending, and 57% expect farm household spending to rise.
However, some respondents expressed concerns about recent dry weather in certain regions.
Noted a western North Dakota lender: “Severe drought conditions are the biggest issue in our area.”
Read more about the survey at Farm income increased in 9th Federal Reserve District.
The Federal Reserve of Minneapolis contributed to this report.