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KC FED REPORTS STRONG FARM ECONOMY, BUT INTEREST EXPENSES AND DROUGHT INTENSIFY PRESSURES
Nov. 11, 2022
Source: Kansas City Federal Reserve Bank
Interest rates on farm loans increased sharply in the third quarter and the acceleration in farm real estate values continued to ease. Farm income and credit conditions remained solid, but the pace of improvement softened.
The financial impact of drought also intensified, particularly in the southern and western portions of the District. Despite recent headwinds, farm finances remained strong and continued to support sound agricultural loan performance.
The outlook for the agricultural economy generally has remained positive despite a recent pull back in prices of some key farm commodities. Volatility in crop markets, higher expenses and drought could hinder incomes for some producers, but prices of key crops and livestock remained at multi-year highs and profit opportunities across the farm sector remained favorable. The substantial improvement in farm finances and a surge in agricultural real estate values over the past two years have also bolstered balance sheets and continued to provide ongoing support to many operations.
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