High commodity prices supported “profit opportunities for many producers across the farm sector” ahead of the spring planting season, although there were concerns about operating expenses, higher interest rates and drought, said the Kansas City Federal Reserve Bank.
Based on surveys of ag lenders, the report said farmland values, which rose an average 15%, showed signs of softening at the close of 2022.
“While improvement in farm income and credit conditions has softened slightly in recent months, farm finances remained strong, especially following strong agricultural economic conditions the past two years,” said the regional Fed in an Ag Finance Update. The report also pointed to “broad strength in the farm economy throughout 2022.”
Net farm income, a measurement of profitability, was record high in 2021 and 2022, according to the USDA. It forecasts net farm income this year will be the third-highest ever, although a step down from 2022. In Ukraine, ordinarily a major exporter of wheat, corn and sunflower oil, war has injected a larger than usual degree of uncertainty into agricultural markets.
Agricultural banks said interest rates on farm loans were 3 percentage points higher in the final month of 2022 than they were in late 2021. “Rates rose to the highest level since 2008 and pushed up financing costs considerably,” said the report.
“While the value of most types of farmland continued to rise, the increase was the slowest since early 2021,” according to the report. Growth slowed alongside the higher interest rates. Non-irrigated cropland increased in value by 15% in the Chicago, Dallas, Kansas City and Minneapolis federal reserve districts during 2022, down a notch from the 20% pace in early 2022. “In some areas, the growth in farmland values has softened most for lower-priced land and in states most heavily affected by drought,” said the report.
Source: agriculture.com
Categories: Kansas, General