In the third quarter of 2023, signs of easing were seen in farm loan conditions at the Tenth District Fed in Kansas City. This was evident through lower farm incomes and loan repayment rates compared to the previous year, which marks the second consecutive quarter of decline. The moderation was more apparent in areas heavily affected by drought, while areas focused on livestock production experienced a more moderate effect. Despite this easing, agricultural real estate values in the region have remained stable.
The agricultural sector has been affected by a softening trend in recent quarters, which has coincided with moderation in commodity prices. Higher production costs and lower prices of key products likely contributed to lower farm incomes in 2023. However, despite lower incomes and higher interest costs, the performance of agricultural loans has weakened significantly. Despite these challenges, the solid financial position cultivated over the past two years has helped to keep performance strong.