The agricultural credit conditions in the Kansas City Fed’s Tenth District showed signs of moderation during the third quarter of 2023. This was evident from lower farm income and loan repayment rates compared to the previous year, marking the second consecutive quarter of decline. Despite this softening trend, agricultural real estate values in the region remained stable.
The ag economy has been affected by a softening trend in recent quarters, which has coincided with a moderation in commodity prices. The combination of elevated production costs and a decrease in the price of key products over the past year is likely to have contributed to a reduction in farm income in 2023. However, despite these challenges, the performance of agricultural loans has remained strong, thanks to the solid financial position cultivated over the past two years.
This shift comes after two years of substantial improvement that had been bolstering loan performance. In areas heavily affected by drought, the impact of this moderation was more evident while areas more focused on cattle production experienced a more tempered effect. Nevertheless, farmers are facing challenges such as high production costs and decreased revenue from key products, which is likely to affect their ability to repay loans and maintain their financial stability.
