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KC FED REPORTS AG CREDIT CONDITIONS REMAIN STRONG AS RISKS GROW
Aug. 26, 2022
Source: Kansas City Federal Reserve Bank
Agricultural credit conditions remained strong in the second quarter, but slower improvement was expected in the coming months.
Farm income increased further according to respondents of the Federal Reserve Surveys of Agricultural Credit Conditions, but the pace of increase slowed from recent quarters and further softening was expected going forward. Farm loan repayment rates continued to strengthen, but the pace of improvement also slowed. Following nearly two years of acceleration, farmland values also showed signs of moderating as interest rates increased more notably.
Strength in farm finances continued to support a positive outlook for agricultural credit conditions through the remainder of 2022, but risks to the farm economy have become more notable. Crop and livestock prices remained elevated, but have been volatile in recent months alongside ongoing uncertainty about the outlook for supply and demand of some major commodities.
With substantial increases in production costs over the past two years, profit margins for many producers could be pressured with a sizable decline in commodity prices. Despite growing risks, balance sheets for most producers remained strong and profit opportunities during 2022 remained well in reach.
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