Fed Official Says Ag Could be Headed for Headwinds

A Federal Reserve official told Congress the Ag economy may be headed for a slowdown later this year or early next. Kansas Federal Reserve Bank Vice-President Nathan Kauffman told House Ag lawmakers that farm credit conditions have strengthened during the last two years with rising commodity prices and land values.

But Kauffman says the war in Ukraine has changed the economic landscape.

“While the strength of farm income these past two years is likely to sustain conditions in agriculture for quite some time, some borrowers may face heightened financial stress in the year ahead if costs continue to rise and commodity prices ease further.”

Overall, Kauffman says the U.S. farm sector seems well-positioned financially for the rest of this year. “But some measures do appear to have softened in recent weeks, and some producers may face more substantial credit challenges than others.”

In a word, economic conditions are uncertain.

“Uncertainty about the outlook for the agricultural economy is high and will depend significantly on global factors, particularly, the war in Ukraine and the strength of global economic activity.”

Kauffman says the war has had a “direct impact” on the price of commodities and on fuel and fertilizer inputs, creating market uncertainty, volatility, and lender concerns as farm margins tighten.