Agricultural credit conditions in the Kansas City Fed’s Tenth District weakened in the third quarter of 2023.
Farm income and loan repayment rates were lower for the second quarter in a row than a year ago. The slowdown was more pronounced in the areas most affected by the drought, but milder in the areas with the highest cattle production.
After two years of significant improvements that continued to support loan performance, conditions have weakened slightly.
Despite weaker agricultural finances and significantly higher interest rates, agricultural real estate values in the region remained stable.
The agricultural economy has weakened in recent quarters, accompanied by a weakening in raw material prices. Combined with increased production costs, a drop in prices for many key products last year has likely led to a decline in farm income in 2023.
Despite declining incomes and high interest costs, agricultural credit performance remained stable and continued to be supported by strong finances over the last two years.