• Thu. Nov 30th, 2023

Improved Agricultural Sector Prompts Relaxation of Loan Terms


Nov 21, 2023

In the third quarter of 2023, the agricultural credit conditions in the Kansas City Fed’s Tenth District showed signs of softening. This was evident through lower farm income and loan repayment rates compared to the previous year, marking the second consecutive quarter of decline. The impact of this moderation was more pronounced in areas heavily affected by drought, while areas more focused on cattle production experienced a more tempered effect.

Despite this softening in farm finances and a significant increase in interest rates, agricultural real estate values in the region remained stable. This stability can be attributed to the ag economy’s resilience, which has been affected by a softening trend in recent quarters and a moderation in commodity prices. Despite elevated production costs and a decrease in the price of key products over the past year, farm income is expected to remain stable due to solid financial position cultivated over the past two years.

The performance of agricultural loans has remained strong despite these challenges, thanks to their solid financial position. The substantial improvement that had been bolstering loan performance for two years had contributed to this stability. However, it is important to note that agricultural lending is still subject to various risks such as unforeseen weather events, changes in market conditions and economic downturns that could affect its stability.

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