St. Louis Federal Reserve Bank Farm Income chart

The slump in farm income has been going on for five years, according to the St. Louis Federal Reserve Bank's latest survey of agricultural bankers.

The bankers have reported declining farm income for 20 straight quarters. The latest survey was conducted in December, and the bankers expect farm income to decline in this year's first quarter too.

“We have heard rumors of large farms filing for bankruptcy,” one Missouri banker told the Fed's survey-takers. “Farmers in our area still have crops in the field.”

An Arkansas banker blamed the latest woes on trade policy, saying, “Tariffs are beginning to take a heavy toll on local farmers and agricultural businesses in our region.”

The current index value marks the 20th consecutive quarter with a value below 100. Based on a diffusion index methodology where results above 100 indicate proportionately more bankers report higher income compared with the same quarter a year ago and results lower than 100 indicate more report lower income from a year earlier, the fourth-quarter index value for farm income was 41. Expectations for farm income in the first quarter of 2019 were only slightly better with an index value of 48.

However, according to the report, the index values suggest fewer bankers reported declines in household spending. Bankers are slightly less pessimistic about the prospects for household spending and capital expenditures in the first quarter of 2019.

Despite further downward pressure on farm incomes, prices of quality farmland and ranchland or pastureland values all rose.

Previous surveys have generally predicted that farmland prices would fall along with incomes, but land buyers continue to defy those predictions. Cropland values rose 3.4 percent last year, the latest survey says, and pasture or ranch land is up 6.5 percent.

Cash rents for quality farmland rose 2.9 percent in the fourth quarter, following a 2 percent gain in the third quarter. Cash rents for ranchland or pastureland rose by less, 1.3 percent, after increasing by 0.8 percent in the third quarter.

When asked about the health of the rural economy, two-thirds of the bankers predicted that conditions in their regions would stay the same in 2019, while one-third predicted that conditions would worsen.

Looking at expectations for farmland returns, nine in 10 bankers expect farmland returns to be positive, greater than 0 percent but less than 5 percent.

The survey respondents are all in the St. Louis Fed's district, which covers all of Arkansas and parts of Missouri, Illinois, Indiana, Kentucky, Tennessee and Mississippi.