OMAHA — Drought and flooding in several Midwest and Western states combined with higher production costs to weaken farm income in the second quarter, the Federal Reserve Bank of Kansas City said Monday.
Most of the bankers surveyed say they expect farm income growth to slow in the coming months, but few banks are concerned about the health of their agricultural loans.
The 10th Federal Reserve District, based in Kansas City, Mo., covers Kansas, Nebraska, Oklahoma, Wyoming, Colorado, northern New Mexico and western Missouri.
Farmers throughout the region have been battling extreme weather this year.
Heavy spring rains and significant snowmelt caused flooding along the Missouri and Platte rivers that damaged farmland in Nebraska, Iowa, Missouri and Kansas.
And farmers in the southern Plains have been battling drought.
But most bankers say they don't believe they have any significant problems with 90 percent of their agricultural loans. And of the loans that do have problems, the Fed said most are only minor problems.
The value of irrigated cropland in the district grew 3.9 percent over the first quarter, while the value of nonirrigated land was up 2.3 percent. Overall, this year's farmland values are about 20 percent higher than at the same time last year.
Ranchland values in the district grew about 1 percent from the first quarter of 2011 to the second quarter. And ranchland values remain about 11 percent higher than a year ago.
The number of farms for sale remains low, so land prices will likely remain elevated. The Fed said more farms may go on the market after the fall harvest.
The Federal Reserve's quarterly report is based on a survey of 246 banks.