Agricultural credit conditions in the Kansas City Fed’s Tenth District softened during the third quarter of 2023, with farm income and loan repayment rates lower than a year ago for the second straight quarter. However, the moderation was more pronounced in areas hit hardest by drought, but more tempered in areas most concentrated in cattle production. Despite this, agricultural real estate values in the region remained firm.
Conditions have weakened slightly following two years of significant improvement that continued to support loan performance. The ag economy has softened in recent quarters alongside a moderation in commodity prices. Together with elevated production costs, a drop in the price of many key products during the past year has likely reduced farm income in 2023. Despite this, ag loan performance has remained solid with ongoing support from strong finances during the past two years.