Due to the decline in the farm economy, credit conditions in the Tenth District of the Kansas City Fed have softened. In contrast to a year ago, farm income and loan repayment rates have been lower for the second consecutive quarter, particularly in areas heavily affected by drought. However, this trend is less pronounced in areas primarily concentrated on cattle production. Despite the softening of farm finances and higher interest rates, agricultural real estate values in the region have remained stable.
In recent quarters, the agricultural economy has weakened alongside a decrease in commodity prices. The combination of reduced prices and increased production costs has likely led to a reduction in farm income for 2023. Despite these challenges, agricultural loan performance has remained steady due to continued support from strong finances over the past two years.