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KC FED: STRONG FARM ECONOMY SUPPORTS AG CREDIT CONDITIONS, LOAN PAYBACKS AT FASTEST PACE ON RECORD
Aug. 16, 2021
Source: Kansas City Federal Reserve Bank
Farm income and credit conditions in the Tenth District remained strong through the first half of 2021. Alongside a sharp turnaround in agricultural economic conditions and lasting support from government programs related to pandemic relief, farm income and loan repayment rates both increased from a year ago--at the fastest pace on record.
The improvement in farm finances eased credit issues and contributed to softer demand for farm loans. With support from a strong farm economy and historically low interest rates, farm real estate values rose 10% from a year ago, which was the largest increase since 2013.
The outlook for profit opportunities in 2021 remained strong for most agricultural producers as commodity prices remained well above recent years. Conditions in the cattle industry remained somewhat weaker, however, and drought continued to hinder conditions for farmers and ranchers in some areas of the District.
Nearly all banks reported that production expenses for both crop and livestock producers increased and cash rental rates in the District also increased, which could pressure margins going forward. Despite potential headwinds, bankers indicated they expected improvement in farm income and credit conditions to continue in the months ahead.
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