The Census of Agriculture and agricultural industry risks

How banks can use census data to quantify the impacts of policy and regulatory change

By Federal Reserve Bank of Minneapolis Senior Agricultural Coordinator, Tait Berg
April 30, 2021

The U.S. Department of Agriculture’s Census of Agriculture includes data about farmers and ranchers in every county in the United States.1 The census includes information about land use and ownership, operator characteristics, production practices, income, and expenditures. Farmers and ranchers, businesses, policymakers, and legislators use the data from the census to make business decisions and craft policy. Banks can use the census data to develop their business strategy or as a risk management tool to assess and analyze policy or regulatory changes.

Ninth District state member banks and agricultural loan profiles

The census data are important to state member banks because they include important information about their market area and customer base. The banks are closely connected to the district’s farmers and ranchers, agricultural communities, and the supporting businesses in each community. Table 1 shows the balance of outstanding agricultural loans at state member banks in the Ninth District. At the end of 2020, the total outstanding balance of agricultural loans (production and farmland) in the district totaled $3.4 billion. All but three state member banks in the district had an agricultural-purpose loan in their loan portfolios. Agricultural banks account for the majority, about 65 percent, of the outstanding agricultural loan balances in the district.

1. Ninth District state member banks' agricultural production and farmland loans ($1,000s)^a

	Production loans ($1,000)	Ag RE loans ($1,000)	Percent of ag loans	Median ag loan concentrationb
Non-ag bank	611,252	579,375	35%	5%
Ag bank	1,298,601	878,827	65%	46%
All banks	1,909,853	1,458,202	100%	16%
a Dec. 31, 2020, Reports of Condition and Income for state member banks headquartered in the Ninth District. b Median concentration as measured by the median percent of ag loans to total loans.

Most agricultural banks are headquartered in and have branches in rural areas. Because their local economies are heavily reliant on agriculture, these banks have a higher percentage of agricultural loans to total loans (agricultural loan concentration). The higher concentration of agricultural loans compared to other banks makes these banks particularly vulnerable to policy changes affecting farmers and ranchers, as well as changes to the health of the entire agricultural industry.

Agricultural policy and banking uncertainty

Some changes in agricultural-related policy are expected, such as the Farm Bill, but other agricultural policy changes may come about for a variety of unexpected reasons (a recession or a pandemic, for example). As policymakers discuss and enact new policies and regulations that could alter common agriculture practices, uncertainty for both producers and bankers may result. The topics of farming and grazing practices, water use, and agriculture’s role in carbon sequestration are some recent examples discussed by industries and policymakers. Some of the scenarios discussed would have serious implications for producers and bankers.

The following are scenarios, not based on any specific legislation or proposal, that highlight topics in public discourse and discussions related to agriculture. How would a bank’s borrower base or market area be impacted if any of the following became a reality?

• Producers must reduce artificial water use by 25 percent.
• Row-crop farmers must adopt 100 percent no-till or organic practices.
• Grazing permits will no longer be allowed on public lands.
• Producers must reduce cattle herd sizes by 25 percent.

Any of the above would require a producer to seriously reassess current business and land use practices. In some cases, these requirements could cause the producer to exit the industry if transitional and compliance costs are too high. How much a bank could be affected by these changes would depend on the number of producers and their practices in each market area. Using the data in Table 2, we can see that almost 40 percent of operations in Montana use irrigation and about 21,000 operations in Minnesota have cattle. How many of those operations would survive if these scenarios were true? The scenarios listed above would have far-reaching implications for the farming operations and state member banks in the district.

Ninth Farm operations in the Ninth District

According to the most recent census, the Ninth District includes over 170 million acres of farmland and 171,000 farm operations.3 Table 2 includes select statistics for each state in the district. Cropland and pastureland account for almost 95 percent of the farmland in the district, with the remaining being woodland, timberland, and other. Less than 10 percent of farm operations have irrigation, but over half of the district’s farm operations using irrigation are in Montana. Almost 40 percent of the operations in the district raise cattle. Cattle operations are the largest proportion of the livestock operations for each state, compared to other types of livestock. Overall, less than 1 percent of farm operations in the district are certified organic operations.

2. Select census data for Ninth District farm operations

	Farm operations	Pastureland	Cropland	Operations with irrigation	Operations with cattle	Certified organic operations
Minnesota	68,822	1,073,788	21,786,756	3,220	20,969	647
Montana	27,048	38,459,451	16,406,300	9,941	11,400	193
North Dakota	26,364	9,871,762	27,951,676	764	8,777	128
South Dakota	29,968	21,997,620	19,813,517	1,798	13,968	82
Wisconsina	16,836	261,425	2,415,661	834	7,458	318
Upper Peninsula of Michiganb	2,313	44,973	230,550	N/A	N/A	N/A
Ninth District	171,351	71,709,019	88,604,460	16,557	62,572	1,368

^a Dec. 31, 2020, Reports of Condition and Income for state member banks headquartered in the Ninth District.
^b The Ninth District includes all 15 counties located in the Upper Peninsula of Michigan. The U.P. has very few farms and agricultural activity compared to other states in the Ninth District. In addition, no state member bank headquartered in the U.P. has a significant volume of agricultural loans. Therefore, the author did not collect or analyze select data for the purposes of this article.
Source: 2017 Census of Agriculture

As shown in Table 3, the market value of livestock and crops sold from all operations in the district totaled over $42 billion during the census year.4 Some operations may have sold only crops or livestock, while others sold a combination of both. Farm operations across the district vary considerably by size and market value of products sold. The average operation size in the district was 995 acres with an average market value of products sold totaling $246,640.

Table 3 includes more information about the average size of operations and the market value of products sold for each state.

3. Farm size and market value of products sold by state

	Average farm size in acres	Average market value of products sold per farm	Average market value of products sold per acre	Market value of animal products sold ($1,000s)	Market value of crops sold ($1,000s)
Minnesota	371	267,289	721	8,203,872	10,191,518
Montana	2,149	130,162	61	1,935,608	1,585,015
North Dakota	1,492	312,324	209	1,553,488	6,680,614
South Dakota	1,443	324,397	225	4,554,966	5,166,557
Wisconsina	230	136,013	591	1,472,109	817,809
Upper Peninsula of Michiganb	195	43,404	223	66,092	34,301
Ninth District	995	246,640	248	17,786,135	24,475,814

^a The Ninth District includes 26 counties in northwestern Wisconsin.
^b The Ninth District includes all 15 counties located in the Upper Peninsula of Michigan. The U.P. has very few farms and agricultural activity compared to other states in the Ninth District. In addition, no state member bank headquartered in the U.P. has a significant volume of agricultural loans. Therefore, the author did not collect or analyze select data for the purposes of this article.
Source: 2017 Census of Agriculture
 
The census data combined with policy or regulatory proposals can help quantify the impact of these changes to local farm operations, their supporting businesses, and a bank’s market area. The knowledge can prove to be a powerful tool for overall bank strategy and how the bank could navigate policy changes. Banks can access the most recent census data and census data query tools at the National Agriculture Statistics Service’s census webpage.

 

Endnotes

1 The U.S. Department of Agriculture’s National Agricultural Statistical Service conducts the census every five years. The NASS conducted the most recent census in 2017. The most current and historical census data can be found at www.nass.usda.gov/agcensus. Users can also reference the census data query tool for a more user-friendly experience at https://www.nass.usda.gov/Quick_Stats/CDQT/chapter/1/table/1.
2 Agricultural banks include all banks with agricultural loans comprising at least 25 percent of total loans in each quarter. The group of agricultural banks is specific to each quarter, and data are not adjusted to account for banks meeting the agricultural bank threshold in any previous quarter.
3 Farmland includes cropland, pastureland, woodland, and other agricultural purpose land. The USDA defines a farm as any place that produced and sold—or normally would have produced and sold—at least $1,000 of agricultural products during a given year.
4 This figure includes crop and livestock production from the Upper Peninsula of Michigan. The figure is also a point in time valuation of the market value of products sold. The market value of products produced will fluctuate as production values and market prices received by producers change over time.