Agricultural credit conditions in the Tenth District of the Kansas City Fed remained strong, and farm real estate values continued to increase. However, growth has softened.
While improvements in farm finances and credit conditions steadied and some lenders expected a deterioration in the months ahead, multiple years of strong incomes continued to keep credit stress low. The outlook for the U.S. farm economy in 2023 remained favorable as prices of key commodities were at multi-year highs. Financial performance and liquidity at agricultural banks remained solid and farm lenders appeared well-positioned to meet higher credit demand through the early months of this year.
Farm loan interest rates rose alongside further increases in benchmark rates. The average rate charged on agricultural loans was about 30 basis points higher than the previous quarter and almost 300 basis points higher than a year ago. The farm real estate market has softened as interest rates rose.
