Agricultural credit conditions in the Kansas City Fed’s Tenth District softened during the third quarter of 2023, with lower farm income and loan repayment rates compared to a year ago. While this moderation was more pronounced in areas hit hardest by drought, it was more tempered in areas most concentrated in cattle production. Despite these challenges, agricultural real estate values remained firm, defying expectations that higher interest rates would have a significant impact on the region’s ag economy.

Despite recent improvements, conditions have weakened slightly following two years of significant improvement that continued to support loan performance. The ag economy has softened alongside a moderation in commodity prices and elevated production costs. A drop in the price of many key products during the past year has likely reduced farm income in 2023. However, despite these challenges, ag loan performance has remained solid with ongoing support from strong finances during the past two years.

Overall, while agricultural credit conditions in the Kansas City Fed’s Tenth District softened during the third quarter of 2023, farmers continue to face significant challenges due to low commodity prices and high production costs. However, despite these challenges, ag loan performance remains solid with ongoing support from strong finances during the past two years.