In the Kansas City Fed’s Tenth District, agricultural credit conditions showed signs of improvement during the third quarter of 2023. This was evident by higher farm income and loan repayment rates compared to the previous year, marking a significant turnaround from the previous two years of decline. The impact of this improvement was more noticeable in areas with stronger cattle production, while areas heavily affected by drought saw only a moderate effect.
Despite the positive outlook for farm finances, agricultural real estate values remained stable in the region. This stability can be attributed to a softening trend in recent quarters that coincided with a moderation in commodity prices. However, elevated production costs and a decrease in the price of key products over the past year likely contributed to a reduction in farm income in 2023.
Despite these challenges, agricultural loans continued to perform strongly thanks to the solid financial position cultivated over the past two years. While interest rates have increased significantly since then, lenders are confident that farmers will continue to meet their loan obligations as long as commodity prices remain stable and production costs remain manageable.