Ag is Essential but Struggling
The first part of column deals with their diffusion Index. This index uses a survey of the bankers in their region. They simply ask if conditions in the current quarter were higher, lower or the same compared to the year-earlier quarter. They subtract the lower percentage from the higher percentage and then times by a 100. This means the index could be as high as 200 or as low as zero.
The highest index was achieved in 2010/11 at about 165. It then dropped to 100 (neutral) in 2013 and has been stuck below 100 since then. The low in the last 10 years was in 2016 with multiple readings below 20.
The first quarter of this year actually had the highest reading of the last 5 years near 80, however, this quarter dropped all the way to about 30 which appears to be one of the largest drops ever.
More telling is the trends within the district. Kansas and Western Missouri farmers did not see a large drop but the other parts (Colorado, Northern New Mexico, Wyoming, Nebraska and Oklahoma) saw extreme drops. Nebraska alone saw a drop from about 75 to about 10 and the expectation for the next quarter is not much better.
Most farmers appear to see moderate or significant financial help from the Paycheck Protection Program and Coronavirus Food Assistance Program. On average less than 10% of farmers who responded indicated no assistance from either of these two programs.
The index related to expectations of loan repayment rates had almost gotten back to neutral a couple of quarters ago but this expectation for next quarter see almost a 50 point drop.
Expectations for lower land values saw a 10% downtick in the index and cash rents have dropped on average by about 2% during the year.
The report likely does not show anything that we did not already surmised but this reports the facts to back it up.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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