Fed Banks say U.S./China Trade Battle the Biggest Threat to Farm Economy

Posted on 05/09/2019 10:59 AM

Banker surveys released by the Federal Reserve Banks of St. Louis and Kansas City showed farm incomes in the Midwest and Mid-South fell again in the first quarter of the year, with about two-thirds of bankers saying the biggest risk to the farm economy this year is the ongoing U.S./China trade battle. This comes as no surprise to the farm sector. Of note, this marks the 21st quarter in a row where farm income has declined for producers in the area covered by the Federal Reserve Bank of St. Louis, which includes all or parts of Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Major flooding and spring blizzard in some areas added to the financial strain for farmers in these Fed districts, bankers noted. Damage assessment is still underway.

Bankers noted that demand for farm loans remains strong and farmers’ ability to repay loans weakened at a slightly faster pace than in previous quarters. The survey also showed that interest rates have climbed across all loan types.

The St. Louis Fed asked bankers what percentage of their customers have borrowed up to their loan limit. The results showed that 35% of bankers reported that less than one-fourth of their customers had borrowed up to their loan limit, but 31% percent reported that more than half of their customers had borrowed up to their loan limit.

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