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KC Fed: Farm Economy Solid, But Showing Signs of Slowing
USAgNet - 08/16/2022

Financial conditions in the Tenth District farm economy remained solid in the second quarter, but survey contacts reported signs of slower growth that appeared likely to continue in the coming months.

Following rapid gains in farm real estate values in recent quarters, valuations moderated in the second quarter alongside recent declines in agricultural commodity prices. Farm income remained stronger than a year ago, but an increase in farm loan interest rates, drought, higher input costs, and the pullback in commodity prices likely contributed to a slightly less optimistic outlook on the farm economy than in the previous quarter.

While the outlook for the District agricultural sector in 2022 has remained positive, lenders reported growing concerns about 2023. A larger share of lenders reported significant increases in production expenses for producers compared to last year. In addition, several respondents commented that severe drought has reduced hay and forage for livestock and contributed to higher feed costs.

Despite these concerns, farm loan repayment problems declined to the lowest level in more than 7 years, and more than half of survey respondents expected farm income to increase or remain unchanged in 2023, highlighting continued strength in the financial position of farm borrowers.

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