In the third quarter of 2023, agricultural credit conditions in the Kansas City Fed’s Tenth District showed signs of softening, with lower farm income and loan repayment rates compared to the previous year. This marked the second consecutive quarter of decline, with the impact more evident in areas heavily affected by drought and less so in those focused on cattle production. Despite this moderation, agricultural real estate values remained stable.
The ag economy has been affected by a softening trend in recent quarters that 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 the softening finances and higher interest rates, the performance of agricultural loans has remained strong due to solid financial positions cultivated over the past two years.