Fed Expert: Land Values Are Keeping Farm Credit Afloat

Credit conditions in agriculture weakened in 2024, with rising interest rates and declining farm income putting pressure on loan repayment, according to Nathan Kauffman, Senior Vice President at the Federal Reserve Bank of Kansas City. While financial stress has grown, farmland values have remained steady, providing some stability. “Despite the various pressures, despite the increases in financial stress at a modest pace, declines in repayment rates, tighter profit margins, higher interest rates, the uncertainty that we could spend the rest of the afternoon talking about, farm real estate values have held firm,” Kauffman explained.  However, the demand for farm loans has increased as expenses stay high, and commodity prices fall. Many farmers are restructuring debt to manage financial strain, a trend the Fed is watching closely. “When you’re thinking about this from the perspective of a producer, expenses are still quite high, commodity prices and income have been declining, that naturally leads into an expectation then that you’re going to see more in the way of demand for financing,” Kauffman said. As lenders extend credit lines and farmers adjust to economic shifts, experts are closely monitoring whether stress levels will continue to rise in 2025.