By Ty Kreitman Farm finances and credit conditions continued to weaken in the second quarter of 2025.
The Tenth District Survey of Agricultural Credit Conditions found farm income and loan repayment rates in the region declined at a pace similar to recent quarters. Deterioration in agricultural credit conditions was most pronounced in areas more dependent on crop revenues, but strong cattle prices continued to support farm finances in some parts of the region.
While lenders reported an increase in loan repayment problems, the majority of issues remained minor and recent assistance related to the American Relief Act was expected to provide modest support to producers.
The outlook for the U.S. farm economy remained subdued through mid-2025 alongside relatively low crop prices. Weak profit margins for key crops have reduced working capital for many producers and led to increased loan demand.
Financing costs also remained elevated alongside relatively high interest rates. Agricultural real estate values declined slightly through the first half of 2025 but remained strong, providing some support to farmer balance sheets.
The Federal Reserve’s Tenth District encompasses Oklahoma, Kansas, Nebraska, Missouri, Colorado, northern New Mexico and Wyoming. Farm finances, credit conditions Farm financial conditions in theTenth District tightened gradually alongside weak crop prices. According to survey respondents, the pace of decline in farm income was similar to recent quarters. Despite ongoing strength in the cattle sector, farm finances in the region have tightened considerably as profit opportunities for crop producers remained limited.
Farm income deteriorated most in areas more heavily concentrated in crop production. The share of lenders that reported farm income was lower than a year ago was highest in Nebraska, Missouri, and Kansas, where corn and soybeans comprise a comparatively larger share of aggregate state farm revenues. In Oklahoma, however, half of respondents indicated farm income was higher than the same time last year.
Producers who are primarily renters could be more exposed to financial pressures. About 60% of survey respondents answered that the financial conditions of majority owner-operators were at least modestly stronger than majority renter- operators. Renters have a more limited ability to leverage strength in farmland valuations to improve working capital positions and could be more challenged by weak crop profits.
As financial conditions continued to tighten, demand for credit increased steadily. Much like farm income, the pace of increase in demand for non-real estate farm loans was also similar to recent quarters. The share of respondents reporting that demand was higher than a year ago increased most notably in Missouri but declined notably in Oklahoma.
Upward pressure on household expenses eased but likely continued to challenge many borrowers. The pace of increase in farm borrower household spending slowed from previous quarters, but some lenders commented that financial pressures from elevated living costs persisted. The share of respondents who reported household spending was higher than a year ago was near 30% in most states.
With further softening in farm finances, credit conditions deteriorated steadily. Farm loan repayment rates declined at a pace similar to recent quarters and comparable to the period between 2017-2019. The share of lenders that reported lower repayment rates increased to more than 30% in all states except Oklahoma and the Mountain States.
Loan performance weakened alongside recent deterioration in financial conditions, but most repayment issues remained relatively minor. On average across the region, less than 10% of farm loan balances had major or severe repayment problems while about 15% had minor troubles. Repayment issues were most pronounced in Nebraska where lenders reported, on average, that about 35% of loans had at least minor difficulties.
The recent distribution of assistance from the American Relief Act may ease some financial pressure for borrowers in 2025. Nearly 70% of lenders in the District anticipated economic and supplemental disaster assistance would provide modest support to farm finances, and another 10% thought the support would be significant. The remaining 20% of respondents expected no support or were uncertain. Interest rates and farmland values As credit conditions tightened and loan demand grew gradually, interest rates on farm loans remained above recent historic averages. Average interest rates charged on farm real estate and operating loans were more than 50 basis points lower than in 2024, but remained more than 125 basis points above the average of the past 20 years. The slight decline over the past several months was similar across all states in the region for all types of loans.
Farmland values remained strong, but declined slightly alongside weaker farm finances and relatively high interest rates. According to lenders, the value of cropland in the region declined by about 2% from a year ago while ranchland increased about 4%. Similar to recent months, cash rents on all types of land were nearly unchanged from a year ago. Despite modest declines in recent months, the average value of non-irrigated cropland remained about 70% higher than in 2020 and more than 300% higher than in 2010. Banker comments Q2 “The strong cattle market is supporting diversified farmers and keeping them afloat. Farmers with mostly wheat are struggling mostly due to very low commodity prices and constant increasing of input costs.”
“Low grain prices are hurting farm cash flows.”
“Broad inflation, high input costs, tariffs and dry moisture conditions will impact agriculture in 2025.”
“Less ag liquidity in 2025 has caused an increase in loan demand for operating expenses.”
“Nearly all of our farm customers are realizing significant losses in working capital. However, they still have significant net worth and reasonable debt-toasset ratios.”
Ty Kreitman is an associate economist in the Regional Affairs Department at the Omaha Branch of the Federal Reserve Bank of Kansas City.