Crop Farms Struggle Amid Drought as Cattle Prices Reach Record Highs

Farm credit conditions in the central Plains weakened further in the second quarter, according to Federal Reserve Bank of Kansas City economist Ty Kreitman. However, strong cattle prices helped cushion losses for diversified operations, making it easier for them to cope with financial difficulties.

Crop-heavy farms remain under greater financial pressure than cattle-focused operations due to narrow crop margins and drought, while smaller farms and majority-renter operations showed significant weakness in the quarter. Lenders reported that farm incomes are still below year-earlier levels, but the decline slowed as corn, soybean, and wheat prices improved.

The strong cattle prices reached record highs, lifting incomes across much of the district, while farmland values rose more than 7% from last year. Repayment stress remains manageable, with less than 10% of farm loan balances facing major or severe problems. Looking ahead, narrow crop margins and high costs remain key risks for the farm economy.