With crop prices still deeply depressed, farmers are borrowing more from their banks and taking longer to repay, according to a quarterly survey of agricultural bankers.
The survey by the Federal Reserve Bank of Minneapolis covered 100 bankers in its six-state district.
Thirty-three percent said loan volume grew in the second quarter, up slightly from the first quarter, and 57% reported loan repayments at a below-normal pace, up from 52% in the first quarter.
Farmers are also making and spending less. More than 80% in the survey said that farm income was below normal in the second quarter, and nearly 90% said capital spending by farm customers was down.
"Unless commodity prices increase, the outlook for farm income is grim," said Tobias Madden, a regional economist at the Minneapolis Fed.
"Reduced farm income has forced farmers to lower spending and increase borrowing."
Times seem especially tough in Montana. All the bankers contacted in that state reported below-normal farm incomes.
Among the report's other findings:
Demand for machinery loans continues to slide. Fifty-nine percent of those surveyed said machinery loan volumes fell in the second quarter, compared with 56% in the first quarter.
Thirty percent of farmers in the district-which includes all or parts of Montana, North Dakota, South Dakota, Minnesota, Wisconsin, and Michigan's upper peninsula-are at their debt limit.
In Montana, 43% of banks' ag customers were upm against debt limits.
Eighty-four percent of bankers expect farm customers' income to be below average in the third quarter.
The one bright spot in the survey was that bankers reported land prices in four of the states had risen since the year earlier. The only state where land prices fell is North Dakota.
