
The KC Fed just released their report on Ag Credit Trends. We review the major items.
The KC Fed released their quarterly agricultural condition report last week. In this post we will review the major trends from the report.
Expectations for future farm income remains strong, however, the expected net income over these months are less than the expectations from the last three quarters. Two quarters ago were the peak expectations with the current quarter at about half. Still good, just not as good.
Farm loan repayments and farm loan demand remains in good shape, however, the expectations on these have shifted down from previous quarters.
As expected, interest rates have shot up in the second quarter. Farm operating loans have increased about 75-100 basis points from the previous quarter and are up slightly more than that from the 2021 average.
Farm real estate loans show the same trend with actual rates a little lower than farm operating loans and the average rate looks close to 5.00-5.25%. Average operating loan rates are about 25-50 basis points higher.
Farmland values in the four major federal reserve ag districts (Chicago, Dallas, Kansas City and Minneapolis) have turned down in the current quarter. Average increases in the previous quarter were between 6 and 10%. The current quarter increases are less than 4%. If interest rates continue to trend higher, it is likely that land values will start to decrease not just a lower increase. We are not quite there yet.
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