Agricultural Economics Department
farm credit, 1976 drought
South Dakota's economy is heavily influenced by agriculture. The credit markets in South Dakota are, therefore, closely related to conditions which prevail in the farm sector. This report, for example, deals largely with bankers' reactions, in early 1977, to conditions immediately after the 1976 drought. A brief updating of events in South Dakota will precede the presentation of their reactions. The farm credit market in South Dakota is influenced by a variety of national and local factors. Commercial bankers, who obtain their funds largely from local sources, were finding it difficult, in early 1979, to meet the loan demands of their customers, and interest rates were substantially higher than in 1977. A number of reasons were given by bankers for this condition. Large outlays for the replenishment of cattle herds, depleted as a result of the poor grazing conditions during the drought, contributed to the situation. Herd replenishment coincided with sharply higher prices for feeder cattle, adding to the sharp increase in credit needs. Further aggravating the need for credit was an increase in farm operating costs and the cost of farm related capital equipment, while the prices for most field crops grown in the state were rather stable. The availability of credit to farmers was also influenced by an increase in demand for credit by non-farm customers, especially in those regions of the state undergoing substantial commercial and industrial growth. At the same time, credit to commercial banks was impaired by higher interest rates in the national money markets. This further reduced the availability of funds to borrowers in South Dakota. Despite the resumption of favorable weather in 1977 and 1978 and improvements in livestock prices, cash receipts from farm marketing in South Dakota did not fully recover in relation to the rest of the country (Table 1).
Agricultural Experiment Station, South Dakota State University
Greenbaum, H., "A Survey of Bankers: Credit Conditions after the 1976 Drought" (1979). Agricultural Experiment Station Circulars. 256.