From the KC Federal Reserve's Report . . .
High commodity prices in the first quarter strengthened farm income and spurred further farmland value gains. Most states in the Chicago, Minneapolis and Kansas City Districts posted double-digit gains in cropland value from the prior year, with gains approaching 25 percent in Kansas, Nebraska and Minnesota.
Even with extreme drought conditions in the Southern Plains, Oklahoma and Texas posted stronger farmland appreciation, reflecting the growing influence of energy markets on farmland values. Land lease revenues for mineral rights surged as energy exploration shifted from off-shore to inland and new reserves of oil and natural gas were identified. With the positive outlook for farm incomes, bankers in the Chicago, Dallas and Kansas City Districts noted that many farmland owners negotiated a substantial increase in cash rental rates for the coming year. Many survey respondents felt that farmland values had yet to peak as demand from farm and non-farm investors continued unabated.
Demand for farm loans remained subdued in the first quarter with mixed expectations for future loan activity. Chicago and Richmond bankers forecasted declining volumes for feeder cattle, crop storage, and dairy loans. However, some survey respondents in the Kansas City and Dallas Districts anticipated modest growth in operating loan volumes during the second quarter as farmers and ranchers faced higher prices for production inputs. Although many producers paid for current expenses out-of-pocket during the first quarter, rising costs for fuel, fertilizer, seed and feed could strain cash positions and prompt increased borrowing in the second quarter. District surveys also reported strong demand for farm machinery and equipment in the first quarter, but noted that capital spending may wane through the rest of 2011 as large equipment purchases are completed.
During the first quarter, farm credit conditions strengthened further as farmers continued to use elevated incomes to pay off loans. Loan repayment rates at agricultural banks remained high during the first quarter and the number of loan renewals and extensions fell in all Districts except Richmond. With soft loan demand, ample funds were available for qualified borrowers. In fact, contacts in the Chicago and Richmond Districts indicated loan-to-deposit ratios were lower than desired and more bankers were actively seeking new loans. Interest rates for farm loans remained historically low, though the Chicago District reported a slight uptick in rates, most notably for operating loans.
Should you wish to compare these numbers to the prior quarter: