Community bankers in the Upper Midwest have been feeling the pinch from last year's weak livestock and crop prices.
Farmers in the region had become more cautious about borrowing and slower to repay debt, bankers told the Federal Reserve Bank of Minneapolis.
The survey of 122 bankers on agricultural credit conditions during the first quarter also found banks were making fewer farm loans than they would like, and some bankers reported problems with fund availability.
Last year, cattle and hog prices sank, and high yields caused a decline in crop prices.
Banks are "a little cautious about what the future may hold," said Edward Lotterman, an agricultural economist at the Minneapolis Fed.
Wet conditions that have delayed planting in many areas have raised crop prices already this year, he said. However, livestock prices will take a couple of years to rebound, he said.
Still, some banks in the region were doing well. South Dakota bankers reported some of the strongest farm-related loan demand in the region.
At $50 million-asset Dacotah Bank, Mobridge, S.D., farm operating loans have been up 10% to 15%, said Darrell Schlepp, vice president. But demand for capital purchases has been down about the same amount, he said.
In the near term, he said, farm lending is going to be "fairly positive."
Respondents in northwestern Wisconsin also reported positively on loan volume, particularly on operating, machinery, and other intermediate categories.
However, in Montana, hit hard by low cattle prices, 73% of bankers said farm and ranch incomes were below normal last winter. Most expected them to be worse in the spring.
Volumes of some types of cattle, machinery, and other intermediate loans were low in Montana. Real estate loans were about normal, and general operating loan volumes were above normal, bankers reported.
Likewise, depressed grain prices hurt North Dakota, where livestock and machinery loans were depressed and general operating loans were above normal, bankers said.
In Minnesota, the state's bumper crop last year improved farm income and spending somewhat, but nearly half the respondents said incomes would deteriorate this spring.
The Minneapolis Fed, which serves the Ninth Federal Reserve District, also covers Michigan's Upper Peninsula.