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Farm Loan Interest Rates Rise Sharply

Farm loan interest rates increased sharply during the third quarter. The Federal Reserve Bank of Kansas City says despite the high borrowing costs, farm real estate values continued higher. However, the rate of increase slowed in the quarter.

Following consistently higher increases earlier in 2022, the value of farmland in most Districts grew at a slightly slower pace during the third quarter. Farm income and credit conditions also remained strong, but the improvement was more limited. With higher production expenses, broad inflation, and higher financing cost, growth in household spending by farm borrowers began to outpace capital spending more noticeably.

Strong farm finances continued to support a generally positive outlook for agricultural credit conditions through the rest of this year. However, some pressures have continued to intensify.

Despite more measured improvements in recent quarters, farm finances remained solid following especially-strong incomes across the sector during the past two years.

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