The Kansas City Federal Reserve says financial conditions in its district remained solid in the second quarter, but survey respondents say signs of slowing growth are likely in the months ahead. Farm real estate values grew rapidly in recent quarters, but those valuations moderated in the second quarter alongside recent drops in agricultural commodity prices.
Farm income remained stronger than last year, 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 for the farm economy than the previous quarter. While this year’s outlook is still positive, lenders reported growing concerns about 2023.
A larger share of lenders reported significant increases in production expenses for producers compared to 2021. Severe drought has reduced hay and forage for livestock and contributed to higher feed costs. Despite concerns, loan repayment problems dropped to the lowest level in seven years.