Growth in farm real estate values remains strong but shows signs of easing slightly alongside higher interest rates. The average interest rates on farm loans increased from record lows at the beginning of 2022 to decade highs by December.
Despite the rapid rise in rates, the value of farmland continued to increase, but at a more tempered pace than earlier in 2022. The growth in farmland values has softened most for lower-priced land and in states most heavily affected by drought.
Looking ahead, a majority of bankers expect higher interest rates to have a negative effect on farm real estate and some anticipated a slight decline in values.
Farm finances and credit conditions were supported by strong commodity prices in 2022 and the outlook for 2023 remains positive despite some persistent risks. Elevated prices for most major commodities continued to support profit opportunities for many producers, but higher expenses and adverse weather conditions remain key concerns.
Cost pressures have been particularly notable for livestock producers in recent months and higher expenses across the sector are likely to increase demand for financing. Farm income and liquidity remained strong through the end of last year, but improvement slowed in the fourth quarter and bankers in some areas of the region were ever so slightly less optimistic about the outlook for the months ahead.
EDITOR’S TAKE:
A good, realistic report from the Kansas City Federal Reserve Bank. The outlook overall remains very positive with some caveats that pertain mostly to the impact of interest rates. Everyone expects farm profitability to moderate slightly in 2023 due to inflationary pressures for crop and livestock inputs and somewhat lower commodity prices. That said, USDA is still predicting the sixth highest net farm income in history, well above historic averages.
Let’s translate all this information. Farmers and ranchers have a lot of cash on hand today. They have made record profits in the past three years. This year, smarter people than I are predicting another very good year. Farmers and ranchers will continue to look for investments, like trucks, to help them lower their tax burden. They can’t purchase those trucks from you if they don’t know you have them available. And with truck inventories building once again, now is a great time to put farmers and ranchers at the top of your prospective customer list. Get on AgTruckTrader.com today. Your inventory will then be visible to the farmers and ranchers you are targeting. Importantly, CAD is launching a national promotional campaign to draw even more attention to you, your inventory and AgTruckTrader.com!
