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U.S. farmers buying lots of machinery

U.S. farmers are buying equipment as agricultural finances strengthen, the Federal Reserve Bank of Kansas City said in its quarterly report on national farm lending.

“Loans for farm machinery and equipment held at high levels with a sharp jump in the volume of intermediate-term loans,” the bank said in its survey, which included national statistics from a Fed survey of banks from the week of Feb. 6.

Total U.S. agricultural loans reached $79.1 billion in the first quarter of 2012, up from $62.8 billion for the same period a year ago. Farm machinery and equipment loans hit $6.9 billion, near the peak demand of $7.1 billion in the first quarter of 2011.

Agricultural banking assets and balance sheets are closely monitored by economists and bankers at the Federal Reserve and by commercial bankers to gauge the health of the rural economy and money supply.

U.S. Agriculture Department projections estimate U.S. farmers’ net assets will rise above $2.2 trillion in 2012, as grain farmers, buoyed by exports and ethanol continue to retire debt, expand land holdings and upgrade equipment including: combines, planters, on-farm storage bins and irrigation systems.

The outlook adds up to good demand from suppliers such as John Deere and many others.

Non-real-estate loan volumes rose 26 per cent compared with last year, driven by a spike in intermediate-term, large loans for unspecified “other” purposes, the Fed said.

“With low cow inventories lifting feeder cattle prices, banks also made larger short-term loans to the livestock sector,” the U.S. central bank said.

Commercial loan demand from farmers may be understating strength of their buying, as many are buying with cash. Loans direct from the suppliers may also be trimming the need for private bank loans.

Overall, strong farm income combined with record farmland prices — up as much as 40 per cent last year despite the large number of farms for sale — kept loan demand from crop producers flat heading into the planting season, the Fed report said.

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