According to NAFB.com, credit conditions in the Tenth District of the Kansas City Fed have softened due to the state of the farm economy. Despite two years of marked improvement, loan performance has recently become more challenging due to a decrease in commodity prices and an increase in production costs. This has led to lower farm income and loan repayment rates compared to a year ago, particularly in areas heavily affected by drought. However, agricultural real estate values in the region have remained stable despite these challenges.
The agricultural economy has weakened in recent quarters alongside a decrease in commodity prices. In combination with heightened production costs, the decrease in the prices of many key products over the past year has likely led to a reduction in farm income for 2023. Nonetheless, despite the softening of finances and much higher interest rates, agricultural loan performance has remained steady, thanks to continued support from strong finances over the past two years.