Farm income high, except for cattle

Elevated commodity prices supported farm income and kept the U.S. agricultural economy strong into this autumn, said the Kansas City Federal Reserve Bank on Wednesday. "Prices of most major crops were at multiyear highs moving into fall harvest and supported farm revenue prospects," wrote economists Nathan Kauffman and Ty Kreitman.

"Weakness in the cattle industry persisted, however, as low cattle prices continued to limit profit margins for producers," said Kauffman and Kreitman following a survey of farm bankers nationwide. "In addition, concerns about drought and higher input costs continued to intensify and likely contributed to producers' financing needs in the livestock sector."

The average size of loans for some livestock categories reached an all-time high and contributed to an overall increase in lending activity at commercial banks, said the Kansas City Fed. The size of operating loans also increased but fewer producers asked for them. Total non-real-estate lending volume was up 8% in the third quarter from the same period of 2020. "A large share of the increase during the quarter was due to an increase in loans used to finance feeder livestock and other livestock, which grew by about 20% and more than 50% respectively."

Net farm income, a measure of wealth, is forecast by the USDA at $113 billion this year, the highest since 2013 and far above the 10-year average of $90 billion annually.

"The conversation about 2022 will be dominated by higher input costs, lower commodity prices, and significant uncertainty, but the early outlook remains profitable," wrote David Widmar at the Agricultural Economic Insights blog early this week. This year's upturn in farm revenue "hasn't been felt equally across all commodities, but the change in cash receipts has been most abundant in corn, soybeans, and hogs."