Ag Credit Conditions Stay Strong As Risks Grow
The Kansas City Fed says agricultural credit conditions remained strong in the second quarter, but slower improvement is expected during the months ahead. Those bankers who responded to the Federal Reserve Survey of Agricultural Credit Conditions said farm income continued to increase. However, the pace of increase slowed in recent quarters, and further softening is expected going forward.
Farm loan repayment rates continued to strengthen, but the pace of improvement also slowed. Following almost two years of acceleration, farmland values also showed signs of moderating as interest rates continued to increase. Strength in farm finances continued to support a positive outlook for agricultural credit conditions through the remainder of 2022, but risks to the farm economy are more noticeable.
With a substantial increase in production costs over the past two years, profit margins for many producers could be squeezed by a sizeable decline in commodity prices. Balance sheets likely remain strong for 2022.
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