The jump in commodity prices last year improved the financial health of U.S. farmers, sending Midwest cropland to record values and boosting profits for rural banks and equipment makers, a Federal Reserve report concluded.
A drought that devastated crops in the southern Great Plains during the second quarter slowed the growth of land values, eroded agricultural income and led to fewer purchases of farm equipment, the Federal Reserve said.
When regulators come knocking at the Bank of Newman Grove, Nebraska, inquiring about loan risks, Chairman Jeffrey Gerhart has a “stress test” ready to show how his portfolio would fare if rural land prices dropped 25 percent. Or 50 percent. Or 75 percent.
Record U.S. agricultural exports are providing an unexpected boost to President Barack Obama ’s target of doubling overseas sales by 2015 and driving earnings for Agco Corp., CF Industries Holdings Inc. and Cargill Inc.
Farmland values in the Midwest rose 13 percent in the third quarter and jumped 24 percent in the Great Plains as record crop prices and insurance more than made up for losses from the worst drought in 56 years, according to separate surveys of bankers by the Federal Reserve.