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Upper Midwest farm incomes decreased in the second quarter of the year according to a survey of ag lenders from the Federal Reserve Bank of Minneapolis. 

The Ag Credit Survey polled lenders in the Fed's 9th District, which includes Minnesota and the Dakotas. 

Eighty-one percent of ag lenders surveyed by the Minneapolis Fed said farm incomes fell in the second quarter compared to the same period last year.

The decline has been a trend for two years and is only been getting worse, said Joe Mahon, regional Outreach Director for the Minneapolis Fed.

“Prices for those core row crops that they're producing are lower than they were a few years ago,” Mahon said. “And that's translating into lower incomes.”

Mahon made his comments prior to a Federal Open Market Committee blackout period.

This year’s weather has mostly been favorable for farmers, which has led to strong crop output for the ninth district states. But farmers are also selling crops in storage from previous years. At the same time, the weather’s been favorable for international farmers as well. This has made crop prices falter with the abundant crop supply.

The loss of income is resulting in farmers spending less on capital expenditures. Sixty-nine percent of ag lenders surveyed said farmers aren’t purchasing as much equipment as last year. 

Mahon said he’s seeing farmers opting to keep their current equipment and have it fixed. They’re also buying used equipment.

Throughout this two-year period of declining farm finances, Mahon said farmers’ household spending had remained steady until now. About a third of the lenders reported seeing a decrease in household spending. 

“This prolonged period of falling farm incomes is starting to lead to a little bit of belt tightening and cutting back on spending by farm households,” Mahon said. 

“Prices are below break even for most producers,” an ag lender in Minnesota told the Minneapolis Fed. “A majority will have to refinance [loans].”

Just over a third of banks said farmers had renewed or extended their loans. More than half said farmer demand for loans grew from last year.

At the same time, many farmers are falling behind on loan payments. Forty-three percent of lenders said the rate of repayment on agricultural loans decreased compared to a year ago, weakening overall credit conditions. 

But most lenders said repayment rates remained steady. And falling interest rates provided farmers some relief.

Farmland prices have also seen a shift. 

Ranch, pasture and irrigated cropland values rose by 2 percent from a year earlier. Nonirrigated cropland values decreased slightly by 0.1 percent year over year.

“Generally speaking, we've seen pretty strong growth in land values over the last few years,” Mahon said. “It's been kind of tapering off over time, and we saw it kind of stall out in the second quarter on a year over year basis.”

The combination of all of these factors has led 74 percent of lenders to say they expect both farm income to decline in the third quarter and loan demand to increase. One Minnesota banker shared concerns about farmers’ future ability to repay their loans.

“Another poor year with low profitability will put significant pressure on financial conditions for 2025,” the banker said. “Which will create significantly more credit issues across the banking industry.”

Mahon is preparing the third quarter survey to be released in November. He said there’s a couple of things to look out for.

Because the survey is released at the tail end of harvest season, he expects to get a good indication on what the ninth district’s production will look like. 

“We have some early estimates that we might have potentially even record yields of soybeans and also maybe corn in some of our states in the region,” Mahon said. 

He’s also adding survey questions about farm labor.

“How immigration policy is factoring into that right now is a big question that you hear a lot about within the farming industry and in rural communities,” Mahon said. “So we thought it would be a good time to ask some questions that we've asked previously about the availability and adequacy of the supply of farm labor.”

Trade policy also remains a big topic of conversation in the farming industry. However, Mahon said he hopes to see how trade impacts local farmers in the third quarter survey.

“You're insulated to some extent, from short term swings in market prices, but only to some extent,” Mahon said. “So we'll see what happens with regard to trade policy over the coming quarter.”

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Tadeo Ruiz Sandoval

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Upper Midwest farm incomes decreased in the second quarter of the year according to a survey of ag lenders from the Federal Reserve Bank of Minneapolis. 





Farmer Lee Tesdell walks in harvested corn field.

Farm incomes continued to weaken during the second quarter

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