Despite two years of significant improvement, agricultural credit conditions in the Kansas City Fed’s Tenth District softened during the third quarter of 2023. The moderation was more pronounced in areas hit hardest by drought and less tempered in areas most concentrated in cattle production. Despite this, agricultural real estate values in the region remained firm.
Farm income and loan repayment rates were lower than a year ago for the second straight quarter, indicating that conditions have weakened slightly following two years of significant improvement. The ag economy has softened in recent quarters alongside a moderation in commodity prices, which has likely reduced farm income in 2023. However, despite this drop and high-interest costs, ag loan performance has remained solid with ongoing support from strong finances during the past two years.
In summary, while agricultural credit conditions have softened in some areas of the Kansas City Fed’s Tenth District due to factors such as drought and a drop in key product prices, real estate values remain firm and loan performance remains solid with ongoing support from strong finances.