FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH

Agricultural Finance Update

Nate Kauffman, Federal Reserve Bank of Kansas City

September 24, 2020

The views expressed here are those of the speaker and do not necessarily reflect the opinions 

of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH

Outlook Themes

Bullet 1

Bullet 2

Bullet 3

• In contrast to the broader economy, U.S. agriculture had been in 

a prolonged downturn even before the pandemic.

• Economic conditions in agriculture have improved since April, 

but due in large part to government payments.

• Agricultural credit conditions have remained weak, but farm real 

estate markets have provided support.
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH The U.S. ag economy had been weak prior to 2020, 

despite modest increases in farm income.

Internal FR

Source: USDA.

0

25

50

75

100

125

150

175

0

25

50

75

100

125

150

175

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Billion, 2020 $ Billion, 2020 $

U.S. Net Farm Income
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH Even before the pandemic, liquidity was expected to 

deteriorate alongside low profit margins.

Internal FR

*Annual average through July 2020

Note: Working capital for 2020 is USDA forecast as of September 2, 2020. 

Sources: USDA and Haver Analytics.

U.S. Farm Sector Working Capital

Internal FR

Ag Prices Received-to-Prices Paid

80

85

90

95

100

105

80

85

90

95

100

105

2010 2012 2014 2016 2018 2020*

Ratio Ratio

0

25

50

75

100

125

150

175

200

0

25

50

75

100

125

150

175

200

2010 2012 2014 2016 2018 2020

Billion, 2020 $ Billion, 2020 $
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH The pandemic disrupted agricultural markets in 

several key ways.

Internal FR

U.S. Meat Production

Sources: USDA, EIA and staff calculations.

U.S. Ethanol Production

400

600

800

1000

1200

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Thousand barrels per day

60

70

80

90

100

110

120

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Cattle

Hogs

Poultry

Index (2019 = 100)

U.S. Food Expenditures

0

20

40

60

80

100

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Food At Home

Food Away From Home

Billion dollars
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH Since April, the prices of some ag commodities have 

improved slightly, but most remain low.

Internal FR

Agricultural Commodity Prices

Sources: CME, WSJ and Haver Analytics.

-40

-30

-20

-10

0

10

20

-40

-30

-20

-10

0

10

20

Cattle Cotton Corn Dairy Wheat Hogs Ethanol Soybeans

April Average As of Sept. 21

Percent change since Jan. 2020
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH Farm income is now expected to be much higher 

than a year ago due to ad hoc government payments.

Internal FR

Source: USDA.

0

20

40

60

80

100

120

140

0

20

40

60

80

100

120

140

20002002200420062008201020122014201620182020

Net Farm Income

Direct Government Payments

Billion, 2020 $ Billion, 2020 $

U.S. Net Farm Income Direct Government Payments 

as a Share of Farm Income

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

1930194019501960197019801990200020102020

Percent Percent
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH Delinquency rates on farm loans have trended 

higher, but the increases have been modest.

Internal FR

*As of Q2 2020

Sources: Board of Governors, Farm Credit Administration, and Survey of Agricultural Credit Conditions.

Farm Loan Delinquency Rates

0

1

2

3

4

5

0

1

2

3

4

5 Commercial Banks

Farm Credit System

Percent Percent

Change in Farm Borrower Liquidity

KC Fed District: Q2, 2020

0

20

40

60

80

0

20

40

60

80

Q2 2020 Expected in Next

Three Months

Higher

Lower

No Change

Share of Respondents
The strength FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH of farmland markets has supported ag 

credit conditions and farm balance sheets.

Farm Real Estate Values

*Average of indices for each participating District – Chicago, Kansas City, Minneapolis, St. Louis, and Dallas.

Sources: USDA, Federal Reserve Surveys of Agricultural Credit Conditions and staff calculations.

80

100

120

140

160

180

200

80

100

120

140

160

180

200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

U.S. Federal Reserve Disticts*

Index (2010=100) Index (2010=100)
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH

Concluding Thoughts

Bullet 1

Bullet 2

Bullet 3

• The potential for severe difficulties in agriculture associated with 

the pandemic has lessened, for now.

• Concerns appear likely to reemerge in 2021, however, as low 

agricultural commodity prices weigh on producer finances.
FEDERAL RESERVE BANK OF KANSAS CITY FEDERAL RESERVE BANK OF KANSAS CITY – OMAHA BRANCH

Bullet 1

Bullet 2

Bullet 3