Tags: Drought | Farmland | Equipment | fed

Drought Crimps Farmland Values, Equipment Sales, Fed Bank Says

Monday, 15 Aug 2011 12:47 PM

A drought that devastated crops in the southern Great Plains during the second quarter slowed the growth of land values, eroded agricultural income and led to fewer purchases of farm equipment, the Federal Reserve said.

While the pace of gains in cropland slowed from the first quarter, properties in a seven-state region that includes Nebraska and Oklahoma were 20 percent more expensive than a year earlier, the Federal Reserve Bank of Kansas City said today in a report on its website. Ranchland was up 11 percent from a year earlier, and farm-credit conditions remained positive even as farmers cut back spending, the bank said.

An historic 10-month drought centered in Texas that’s spread through Oklahoma, New Mexico and Kansas has now moved north, according to the Aug. 9 U.S. Drought Monitor. The dryness has left a “bifurcation” in a domestic farm economy that the U.S. Department of Agriculture expects will earn a record $94.7 billion in profit this year, according to Jason Henderson, a Fed economist.

The drought “has really affected farm incomes in Kansas and Oklahoma,” Henderson said in a telephone interview from Omaha, Nebraska. “Northern areas that have received rain have strong income prospects, while in the Southern Plains, where there has been devastation, they’re looking at crop insurance as their main form of income.”

The bank’s region includes all or parts of Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.

Farmland values have surged in the U.S. during a crop boom in the past year that sent the price of corn, the nation’s biggest crop, up 68 percent in the past year on the Chicago Board of Trade. Soybeans, the second-largest, are up 29 percent.

Equipment Sales

Bankers surveyed by the Fed reported less interest in capital spending for items such as Deere & Co. combines than one year ago. Still, most bankers reported healthy loan portfolios, the Fed said in its report, because of low levels of overall farmer debt.

“Farm balance sheets in the Great Plains tend to be strong,” Henderson said.

On farmland values, regional variation was significant, he said. Gains in Nebraska cropland were the highest in the region, with prices up 30 percent from a year earlier, according to the study. Oklahoma’s 11 percent gain was the smallest, mostly due to more-expensive mineral rights, Henderson said.

The Kansas City, Missouri-based bank’s quarterly survey included responses from 246 banks involved in agricultural lending.

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A drought that devastated crops in the southern Great Plains during the second quarter slowed the growth of land values, eroded agricultural income and led to fewer purchases of farm equipment, the Federal Reserve said.While the pace of gains in cropland slowed from the...
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Monday, 15 Aug 2011 12:47 PM
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