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Agricultural credit conditions in the Tenth Federal Reserve District improved modestly during the third quarter of 1995, according to a survey of 293 agricultural banks. The improvement was marked by an uptick in farmland values, higher commodity prices, and lower interest rates on farm loans. Still, an expected decline in farm income and continued slow repayments on farm loans signaled underlying weakness in the district farm economy.
Farmland values rise
The average value of district farmland increased modestly during the third quarter after stalling the quarter before. On average, nonirrigated cropland values rose 0.8 percent, outpacing a 0.3 percent gain in irrigated cropland values. Ranchland values were flat (Table 1). (All tables omitted). Kansas led the district with an average gain of 0.8 percent, while land values fell an average 0.1 percent in the mountain states. Overall, district farmland values were up 4.1 percent from the third quarter a year ago.
Recent trends in district farmland values reflect a mixed outlook for the district's crop and livestock sectors. Soaring grain prices, which have bolstered income prospects for crop producers, may have kindled investor interest in cropland. A weak profit outlook for the cattle industry, however, most likely accounts for the stall in ranchland values, which remained flat for the second consecutive quarter after a string of solid quarterly gains.
Farm commodity prices climb
Reflecting the recent strength in agricultural commodity markets, the district index of farm commodity prices rose 1.5 percentage points during the third quarter (Table 2). Gains in corn, wheat, and soybean prices anchored the surge in commodity prices. Cattle prices held steady, while hog prices picked up slightly.
With small crops in the United States and other parts...