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UPDATE 1-U.S. farm incomes fall in first quarter; trade war remains top risk to ag economy -Fed banks

P.J. Huffstutter

to ag economy -Fed banks@ (Adds comments from surveys and bankers, adds economic details)

CHICAGO, May 9 (Reuters) - U.S. farm incomes in the Midwest and Mid-Southern states declined yet again in the first quarter of 2019 amid ongoing strain from low commodity prices, trade uncertainty and severe weather, according to banker surveys released on Thursday by the Federal Reserve Banks of St. Louis and Kansas City.

Most bankers said one of the biggest risks to the farm economy this year remains the ongoing trade fight between the United States and China.

This marks the 21st consecutive quarter for farm incomes dropping in the Eighth Federal Reserve District, which includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

"Farmers are running out of capital," one Arkansas banker told the St. Louis Fed, according to the survey. "Commodity prices are too low for input costs and rents (and) land payments."

Bankers surveyed by the Kansas City Fed, meanwhile, said farm incomes fell most sharply in Nebraska and Missouri - both states heavily concentrated in corn and soybean production, and both impacted in areas by heavy spring flooding.

The Tenth District of the Federal Reserve includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico.

"Major flooding and blizzards across some regions in the District late in the first quarter may also put additional financial pressures on some farm borrowers as damages continue to be assessed," said economist Nathan Kauffman, vice president of the Kansas City Fed.

As farm income remained low in both districts, bankers said demand for farm loans stayed strong and the ability of farm borrowers to repay loans weakened at a slightly faster pace than in previous quarters.

The agricultural surveys also revealed that interest rates had increased across loan types - meaning that it is costing farmers more to run their operations, pay for seeds and chemicals to produce their crops, or fix their machinery.

The Kansas City Fed report can be found here: (https://bit.ly/2VfZoHn)

The St. Louis City Fed report can be found here: (https://bit.ly/2JsTTCN) (Reporting by P.J. Huffstutter in Chicago Editing by Chizu Nomiyama and Matthew Lewis)