The US farm economy extended its slide in the third quarter amid slumps in grain and livestock prices, and bankers had a dour outlook for farm incomes in the fourth quarter, said a quarterly report from the Federal Reserve Bank of St Louis.
The third-quarter survey from the bank, released on Thursday morning, showed that bankers surveyed forecast that farm households were continuing to cut back on both household expenses and capital spending for their operations - and were expected to keep trimming costs in the coming months.
The rural economy has been hit by recent bumper harvests that have pushed grain prices to five-year lows and by a strong dollar that has hurt exports.
As a result, farmers have curtailed spending on their businesses, which has sent ripple effects across the agricultural sector and affected everyone from tractor makers to seed companies.
The US Department of Agriculture projected farm incomes this year would drop 36 per cent from 2014 to US$58.3 billion because of declining crop and livestock prices. The forecast is down 20 per cent from an estimate of US$73.6 billion in February.
The St Louis bank survey found a larger percentage of bankers reported a drop in farm income during the third quarter, compared with last year. The rest of the year also shows signs of trouble, according to the report, as bankers grow concerned about the autumn harvest and the recent cooling of livestock prices.