Agricultural Bankers Wary over Future of Farm Income

By Cox, Robert B. | American Banker, April 30, 1993 | Go to article overview

Agricultural Bankers Wary over Future of Farm Income


Cox, Robert B., American Banker


Farmers had banner harvests last year, but the big yields did not turn agricultural bankers into optimists, a new survey revealed.

"Bankers are using last year's record yields as a frame of reference for the future," said Michael L. Weasel, an agricultural lender for Huntington National Bank, Springfield, Ohio. "If 1993 were even average, it wouldn't be nearly as good in comparison."

The study, by the Federal Reserve Bank of Kansas City, shows that agricultural bankers in the lower Midwest are doubtful that farm incomes will remain at 1992 levels. Most agricultural banks are community-size institutions in rural parts of the country.

Many Expect Decreased Income

Forty percent, or 122 of the 300 bankers surveyed, expected farm income to drop in 1993. About one-third expected incomes to stay the same, while only 25% anticipated an increase.

Most of the bankers surveyed expected the increases and decreases to be less than 5% either way.

The Kansas City Fed questioned bankers within the seven states of the Tenth Federal Reserve District, encompassing all or parts,of Kansas, Missouri, Colorado, Wyoming, Oklahoma, New Mexico, and Nebraska. The survey is conducted quarterly and compiled annually.

Last year's healthy farm incomes combined with declining interest rates to bolster loan repayment rates at agricultural banks, according to the survey.

In the fourth quarter of 1992, 19% of the bankers reported higher repayment rates; in the 4th quarter of 199 1, only 8% reported improvement in the rates.

Loan demand continued to be weak among farm bankers, with loan-deposit ratios hovering at about 54%, below the 67% reported for all community banks in the United States. …

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