For the Eighth District overall, the survey’s diffusion index value for realized fourth quarter 2012 farm income versus year-ago levels was 116. (This value is based on a diffusion index where 101-200 indicates higher realized income — based on survey responses — than a year ago and 0-99 indicates lower realized income than a year ago. A value of 100 indicates the same as a year ago.)

In Memphis, the realized fourth quarter 2012 index value was 167, while in Little Rock, it was 125. Meanwhile, St. Louis and Louisville stayed on pace with a year ago with levels of 103 and 100 respectively.



Looking ahead to the first quarter of 2013, most lenders except those in the St. Louis zone were expecting farm incomes to remain steady. At the same time, lenders across the District expected a decrease in first quarter 2013 capital spending compared with a year ago.

A tax provision for accelerated depreciation on qualifying farm asset purchases may have provided a capital spending boost in the fourth quarter 2012 ahead of the provision’s expiration.



Farmland values



Meanwhile, both the value of non-irrigated cropland (or quality farmland) and the value of ranch and pastureland in the Eighth District were expected to continue to trend higher over the next three months.



Lenders estimated that overall District quality farmland was worth an average of $5,230 per acre in the last quarter of 2012, with ranch and pastureland averaging $2,396 per acre.

By zone, bankers estimated that quality farmland values averaged $2,557 per acre in the Little Rock zone; $5,000 per acre in the Louisville zone; $3,194 in the Memphis zone and $6,340 per acre in the St. Louis zone.



Looking ahead for the first quarter of 2013, using a diffusion index methodology (with results above 100 indicating proportionately higher lender expectations compared with the same quarter a year earlier; and results lower than 100 indicating lower lender expectations),the average expectations index for a three-month growth in prices across the District was 144.

By zone, it was 113 in Little Rock; 138 in Louisville; 144 in Memphis and 153 in St. Louis.



Ranch and pastureland values were estimated to average $2,150 per acre in the Little Rock zone; $2,050 in the Louisville zone; $1,894 per acre in the Memphis zone and $2,728 per acre in the St. Louis zone.

District wide, the average expectations index for three-month growth in prices was 133. By zone, it was 114 in Little Rock, 133 in Louisville, 133 in Memphis and 138 in St. Louis.



Across the District, gains in quality farmland prices over the next three months were expected to continue to outpace gains in ranch or pastureland prices across all zones.



Ag loan demand, repayments



Demand for agricultural loans was also expected to remain healthy during the first quarter of 2013 compared with a year earlier, with the strongest demand being seen in the Memphis and Louisville zones.

In addition, first quarter 2013 availability of funds and loan repayment rates were expected to be on par or stronger than first quarter 2012 rates across the District.




This survey used in the Agricultural Finance monitor was developed and conducted with the help of the Kansas City Fed.