In the Kansas City Fed’s Tenth District, signs of moderation were evident in agricultural credit conditions during the third quarter of 2023. Lower farm income and loan repayment rates compared to the previous year marked the second consecutive quarter of decline. The impact was more pronounced in areas heavily affected by drought, while areas focused on cattle production experienced a more tempered effect. Despite this softening trend, agricultural real estate values remained stable in the region.
The ag economy has been affected by a softening trend in recent quarters that coincided with a moderation in commodity prices. Elevated production costs and a decrease in key product prices over the past year likely contributed to a reduction in farm income in 2023. However, despite these challenges, agricultural loans have continued to perform well due to the solid financial position cultivated over the past two years.
In conclusion, while agricultural credit conditions showed signs of softening during the third quarter of 2023, ag real estate values remained stable despite higher interest rates and declining farm income. The region’s solid financial position has helped maintain strong performance of agricultural loans despite challenges such as rising production costs and decreasing commodity prices.