Minneapolis Fed Notes “Surprisingly Good End to 2020 for Farmers”

Posted on 02/14/2021 1:56 PM

Coming on the heels of a mild upturn in the third quarter of 2020, farmers and ranchers in the Upper Midwest saw dramatic improvement in the final three months to close out the year, according to the latest survey of agricultural lenders from the Federal Reserve Bank of Minneapolis. The bank serves Minnesota, Montana, North Dakota and northwestern Wisconsin.

Farm incomes and capital spending increased at the end of 2020, according to lenders responding to the Minneapolis Fed’s fourth-quarter agricultural credit conditions survey. The bump in incomes also led to increased loan repayment rates, while loan demand, renewals, and extensions decreased. Farmland values increased on average from a year earlier, and cash rents ticked up as well. The outlook for the beginning of 2021 is positive, with survey respondents predicting further growth in farm incomes and spending.

Looking specifically at farmland values, the bank notes: “nonirrigated cropland values increased 3.6% on average across the district compared with a year earlier, while cash rents for that land increased by 6.2% over 2019. Irrigated farmland values rose 6.9% on average, while ranchland values rose 2.9%t. Lenders in North Dakota reported the largest increase in land values, with nonirrigated land up 8.5%, while Wisconsin, where the number of lenders responding was relatively small, logged a 6.6% decrease in those values.

A Montana lender pointed to an unexpected bump in demand for land due to the pandemic. “Ag real estate has seen an increase in value due to the influx of people from other states moving here during COVID and buying properties,” they wrote in a survey comment.

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