During the third quarter of 2023, agricultural credit conditions in the Kansas City Fed’s Tenth District softened slightly. This was due to a decrease in farm income and loan repayment rates compared to a year ago, which marked the second straight quarter of this trend. The moderation was most pronounced in areas that were hit hardest by drought, but was more tempered in regions with higher concentrations of cattle production. Despite this, agricultural real estate values remained firm in the region.
This weakened ag economy was caused by a combination of factors including a moderation in commodity prices and elevated production costs. Additionally, the drop in prices of many key products during the past year likely reduced farm income in 2023. Despite these challenges, ag loan performance has remained solid thanks to ongoing support from strong finances over the past two years.