Higher Interest Rates Slow the Growth in Farmland Values
Farm real estate values increased considerably in 2022 but showed signs of softening during the final months of the year as interest rates rose sharply. Interest rates on farm loans jumped to decade highs alongside increases in the federal funds rate.
The Kansas City Fed says while the value of most types of farmland continued to rise, the increase was the slowest since early 2021. Agricultural credit conditions remained strong in the 4th quarter and continued to be bolstered by broad strength in the farm economy throughout 2022. The outlook for agricultural credit conditions looking ahead to the rest of 2023 also remained generally positive, despite some ongoing concerns. Elevated commodity prices continued to support profit opportunities for many producers across the farm sector. However, there are persistent concerns about operating expenses, higher interest rates, and intense drought.
Improvement in farm income and credit conditions has softened slightly in recent months.