MINNEAPOLIS — An agricultural credit survey of the upper Midwest indicates a continued decline in farm incomes and pessimism for the near future.
The quarterly survey by the Federal Reserve Bank of Minneapolis included information from 46 agricultural bankers across the Ninth District, who are considered experts in their field, according to Joe Mahon, regional outreach director for the Minneapolis Federal Reserve, who shared the results on Friday, May 16. The Ninth District is an area that covers Minnesota, Montana, North Dakota and South Dakota, and portions of Wisconsin and Michigan. It’s an area rich in corn, soybean and wheat production as well as cattle and poultry.
Mahon highlighted main indicators of the survey, including a look at incomes, loans, land values and rental rates.
Income
Agricultural incomes and capital spending continued to decrease in first quarter across the district. It’s no surprise that the continued decline in income is tied to lower commodity prices, which have been present since 2023. Of those surveyed, 80% saw farm incomes go down from a year ago. A pessimistic outlook comes as 70% of respondents expect to see a decrease in farm incomes over the next three months.
The decrease in income is also showing a decrease in spending. About 70% of respondents said capital spending was down.
“According to most of the people, the vast majority of the people we surveyed, capital spending that is investment in equipment, in buildings and other capital assets by farm households, also dramatically down,” Mahon said.
While capital spending is down, the used machinery market is holding up well, Mahon said.
Interest and loans
Interest rates on farm loans ticked down; loan demand increased, but repayment rates fell.
Loan demand was greater in those areas where farms were diversified with cattle or hogs as cattle have seen record highs recently. Hogs have also seen some improvements.
“In fact, we've got some comments from a number of lenders that operators who are diversified, who are in livestock as well as crop production, are doing a lot better,” Mahon said.
Two-thirds of lenders are expecting an increase in loan demand.
“Again, we've got a lot of comments that farm borrowers have gotten through their cushions of cash or working capital, and that's increasing, that's putting more financial stress on farm household,” Mahon said.
A good sign in the survey for those taking out loans was a slight decrease in interest rates. Those rates remain high in comparison to just a few years ago.
Land values
Despite two years of lower farm income, land values continued to increase, but cash rents declined.
Across the Ninth District, land values were up 5%. Ninth District non-irrigated cropland values increased by more than 4% on average from the first quarter of 2024. Irrigated cropland values rose by nearly 7% from a year ago, while ranch- and pastureland values climbed 8%.
“So overall, land values continue to be strong,” Mahon said. “Maybe a sign of, you know, underlying confidence in the long-term prospects of agriculture in the district, even though, currently, commodity prices are a little bit weaker and harder to support incomes right now.”
Rental rates for non-irrigated land fell by 1%, and irrigated land by 5%.
When asked about the impact of tariffs on the agricultural finances, Mahon said that several respondents noted concerns about the uncertainty over the tariffs, however, he said not to read too far into the effect on this quarter. The survey continues to show an industry battered by lower prices that have been around for a couple of years now. Tariffs could add pain if international markets are threatened, according to some surveyed.
At least one North Dakota banker shared concerns for farms that were not diversified with livestock. They feared that if conditions prolonged into 2026, some of those crop farms might fail.