Despite waning crop prices as of late, farm incomes still have a hold on the fortune of Midwestern rural economies, the Federal Reserve Bank of Chicago notes in a new report detailing the proceedings of its November meeting on the topic.
David Oppedahl, senior business economist, recaps the meeting, which included input from Chicago Fed President Charles Evans, Purdue ag economist Chris Hurt, Farm Credit Administration board chairwoman Jill Long Thompson and others.
Speakers generally agreed that farm incomes have a significant impact on rural economies and the Midwest economy as a whole, and strong public policies and rural lending capacity are more important than ever, Oppedahl reported.
During the conference, Evans shared that in 2012, 11% of the metropolitan counties and 36% of the rural communities in the Chicago Fed's seventh district had cash farm income that was greater than 10% of total personal income.
According to the report, he said new manufacturing opportunities like biofuels and exports will provide enhanced profitability for Midwest farms.
FCA chairwoman Long Thompson added that agriculture's trade surplus should keep the ag economy strong while boosting overall economies of the Midwest and the nation.
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On farm size, Steven Deller of the University of Wisconsin said his research indicates a larger number of farms are owned by absentee landowners and a larger number of farms that are larger in size has not necessarily had a negative effect on the farm economy. Instead, the relationship appears to be positive.
Oppedahl's report said Deller's data showed a higher dependency on agriculture within a rural economy was associated with "higher economic well-being and better public health outcomes."
Counties with larger farms as measured by median acreage tended to have higher economic growth rates and greater levels of well-being, the report added.
Purdue ag economist Chris Hurt addressed the disparity between crop incomes and livestock incomes. Currently, livestock operations have experienced higher profits due to lower feed costs and other factors, while declining crop prices have led crop farmers' profits lower.
In the Midwest, ag production value has actually been restored to its "historical balance," according to Hurt – half from crops and half from livestock.
Hurt said given the specialization of most farms, some rural communities will experience greater pressures from the fall in crop incomes, while others will benefit from the rise in livestock incomes, the report noted.
To support continued economic drive from agriculture, Abram Tubbs of Ohnward Bank and Trust noted that lenders should be a part of the solution when times are tough for agriculture, helping borrowers plan ahead and partner with government resources.
Tubbs encouraged communication and transparency between lenders and borrows so that banks can assess ag producers assets and debts to consider increases in producers' working capital through refinancing, the report said.
Click to read the entire recap of the Chicago Fed proceedings on rural economies and farm income.