Farm Economy Solid

Each quarter, the Federal Reserve Bank of Kansas City surveys commercial bankers in its region concerning farm credit conditions. The Tenth District encompasses Nebraska, Kansas, Oklahoma, Colorado, and parts of Missouri, Wyoming, and New Mexico. The Federal Reserve Bank reports the latest survey conducted in the second quarter shows farm financial conditions overall remain solid. However, bankers in their responses note concerns with what 2023 might hold given the significant increases in input costs seen this year. Findings from the most recent survey include:

• The average interest rate on farm real estate loans increased 70 basis points in the second quarter, 60 basis points on production loans, compared to the first quarter. Nebraska borrowers saw the largest increase with the average interest rate slightly higher than the 2015-2019 average.
• Farm income continued to improve, but the share of bankers reporting higher incomes compared to a year ago dropped slightly. Fewer than half of the bankers anticipate higher incomes in the coming months.
• Nearly 90 percent of respondents reported a significant increase in input costs for crop producers and 60 percent reported the same for livestock producers.
• About 30 percent of bankers reported an increase in loan demand in the first half of 2022 compared to a year ago with 40 percent expecting demand to be higher in the coming months.
• Farm loan repayment rates continued to increase, but at a slightly slower pace. Less than 15 percent of loan balances had repayment issues and the majority of problems were minor. Loans with payment troubles were the lowest since 2014.
• About 40 percent of respondents expect higher farm incomes in 2023 and 40 percent expect incomes to be lower.