Ag real estate values in the area covered by the Kansas City Fed — which stretches from western Missouri to Wyoming — stayed strong through the end of 2023, according to the latest survey of bankers in the area covered by the Tenth Federal Reserve District.
“The value of nonirrigated farmland in the region grew around 10% from a year ago despite sharply higher interest rates and a moderation in farm income and credit conditions,” KC Fed economists said in describing the results. “Capital spending slowed, however, alongside higher rates and lower farm income.”
“The farm economy continued to moderate alongside lower crop prices, but elevated cattle prices and strong farmland values have provided some stability for the sector,” they said.
The conditions caused a jump in demand for farm loans, which grew “at the fastest pace in nearly three years,” the economists wrote. “Farm borrower liquidity has declined over the past year and the share of banks reporting higher loan demand than a year ago reached the highest level since 2019.”
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“Interest expenses in 2023 were two times what was paid in 2022, while expenses for fuel, chemicals, seed, feed and fertilizer were still high, which made it very tough for farm borrowers to show a profit,” said a Northern Colorado banker.
Another in central Kansas said “drought and lower corn prices made things tighter for grain farmers. Many are taking crop insurance proceeds. All of this, coupled with high interest rates, has caused a lot of uncertainty, and farmers seem to be getting more conservative with capital spending.”
The area covered by the district includes Colorado, Kansas, Nebraska, Oklahoma, and Wyoming; 43 counties in western Missouri; and 14 counties in northern New Mexico.
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