Credit Conditions Soften
The latest survey of agricultural credit conditions by the Tenth District Federal Reserve Bank in Kansas City showed continued deterioration in farm financials in the region. Unfortunately, two measures of financial health showed Nebraska agriculture in worse condition compared to other states in the District. The share of Nebraska lenders who reported lower farm income in the second quarter compared to year ago was higher than any other state (Figure 4). And farm loan repayment issues were more prevalent in Nebraska (Figure 5). Commercial bankers in Nebraska, Missouri, Kansas, Oklahoma, Colorado, Wyoming, and northern New Mexico participated in the survey.
Ty Kreitman, an economist with the Federal Reserve, said lower farm income, while seen across the district, was most prominent in areas more heavily concentrated in crop production. Nebraska, Missouri, and Kansas were particularly affected. Oklahoma and the Mountain States, more heavily concentrated in livestock, reported improved income. Lower income led to a greater share of bankers reporting lower repayment rates. More than 30% of bankers reported lower repayment rates in every state except Oklahoma and the Mountain States. Repayment issues were most pronounced in Nebraska where lenders reported about 35% of loans, on average, had at least minor difficulties. Repayment problems, though, remain low from a historical perspective. On average, less than 10% of farm loan balances had major or severe repayment problems while about 15% had minor troubles.
FIGURE 4. FARM BORROWER INCOME CONDITIONS BY STATE
Source: Ty Kreitman, Farm Financial Conditions Continue to Deteriorate, Federal Reserve Ag Credit Surveys, Kansas City Federal Reserve Bank, August 15, 2025.
FIGURE 5. DEGREE OF FARM LOAN REPAYMENT PROBLEMS
Source: Ty Kreitman, Farm Financial Conditions Continue to Deteriorate, Federal Reserve Ag Credit Surveys, Kansas City Federal Reserve Bank, August 15, 2025.
Deteriorating credit conditions probably contributed to the decline in farmer sentiment in August as recorded by the Purdue/CME Group Ag Economy Barometer. Farmer sentiment hit a 12-month low as producers expressed less optimism about the future and reported weak financial expectations for the next year. However, a difference was noted between the sentiment of crop producers versus livestock producers. Livestock producers were more optimistic. At the same time, the latest USDA Economic Research Service forecast projects a net farm income increase of $48.8 billion for this year, mostly due to an increase in government payments of roughly $30 billion and rising livestock fortunes. If realized, net farm income would exceed the 20-year average but remain below the all-time high seen in 2022.
Current credit and income conditions show the broad mix and diversity of agriculture, especially in Nebraska. One sector struggles, another posts positive returns. And while the struggles can be painful, the overall diversity helps agriculture as a whole weather economic storms.