Four Kansas City Fed Updates Worth a Look
The KC Federal Reserve provides a lot of good Ag information on a regular basis
The Kansas City Federal Reserve has put out four updates over the past several weeks that, taken together, sketch where farm credit and land values stand right now. The short version: farmers are borrowing less as crop margins stay tight, the largest banks are trimming operating loans while ag banks and mid-size lenders keep growing, land is holding near record highs on the strength of cattle and government payments, and out west the long-run question of water is starting to show up in what irrigated ground is worth. Here is each one, with a link and what it means for your operation.
1. New Farm Loan Originations Ease Slightly
Francisco Scott · July 10, 2026
Farm lending at commercial banks eased in the second quarter. The volume of new non-real-estate loans ran about 10% below the average of the past two years, though part of that is the normal seasonal slowdown. Almost every loan purpose was lower, with one striking exception: loans for farm machinery and equipment jumped more than 50% above recent years, a sign that some producers are still putting steel in the shed.
Operating loans and feeder livestock loans came in smaller than usual, which tells you working capital needs are being trimmed. Interest rates barely moved. Loans over $100,000 averaged just under 7%, smaller loans a touch above that, and both were flat from the prior quarter.
There was a split by lender size, too: the biggest ag banks cut their average loan about 20% from a year ago, while smaller and mid-size banks grew theirs by roughly 30%, back near 2024 levels. Energy and fertilizer prices had come down by late May, but soft commodity prices kept crop margins tight.
What it means: Borrowing is shrinking because demand is softer, not because credit dried up. If you are financing equipment, you are in good company but make sure you are not stacking new fixed payments onto a tight-margin year.
2. Farm Loan Growth Remains Strong as Lending Shifts at Some Large Banks
Ty Kreitman · July 1, 2026
Step back to the first quarter and the lending picture is one of divergence, not decline. Ag banks, the ones with at least a quarter of their loans in agriculture, kept growing non-real-estate farm loans at a steady clip, while the non-ag banks posted their first drop in that category since 2021. The pullback was concentrated at the top: banks holding more than $1 billion in farm loans cut their non-real-estate farm debt by nearly 10% from a year earlier, even as their farm real estate lending grew about 10%.
Only three of those large lenders cut total farm debt by more than 10%, so this is a handful of big players repositioning, not a broad retreat. The real growth came from mid-size lenders holding $100 million to $1 billion, which expanded on both the operating and real estate sides.
Loan quality stayed solid. Delinquencies at the largest ag banks sat around 2% of loans 30 days or more past due, versus under 1.5% everywhere else, and both were about where they were a year ago. Charge-offs at the big banks even eased a bit after ticking up in mid-2025.
What it means: If your operating lender is one of the large banks stepping back from production loans, do not read it as a mark against you, but do know where you stand and shop the note ahead of renewal season if you need to.
3. How Will Drought and Groundwater Depletion Affect Irrigated Farmland Values?
Ayesha Cooray · June 24, 2026
This is the one to read if you own or rent irrigated ground. Over the past two decades the premium that irrigated land commands over dryland has widened, largely because drought has made reliable water more valuable. That premium is really the market capitalizing the value of the wells, the water rights, and the extra yield you pick up in a dry year. The catch is that the premium only holds if the water holds, and that varies enormously by geography.
Nebraska has barely drawn its aquifer down, less than a foot since 1950, while Kansas is down about 27 feet over the same period and parts of Oklahoma and New Mexico are running near empty. Sure enough, the irrigated premium is highest in Nebraska, lower in Kansas, and lower still in Oklahoma, tracking the water underneath.
Technology has softened the blow: from 2000 to 2024 irrigated acreage held steady and farmers actually applied less water while corn yields climbed, thanks to better irrigation efficiency and drought-tolerant seed. The bank’s conclusion is that the risk to irrigated values is greatest where depletion is already far along, stored water is low, and recharge is limited, meaning places like western Oklahoma and New Mexico.
What it means: An irrigation premium baked into your land value or your cash rent is only as durable as the aquifer under it. If you farm over a thinning water table, it is worth thinking now about how much of that value rests on water that may not be there in twenty years.
4. Continued Resilience in Farmland Values
Ty Kreitman · June 3, 2026
The district’s own survey said much the same about land in the first quarter: values are holding near record highs. Non-irrigated cropland ran about 3% above a year ago, with gains in the Dallas, Chicago, and Kansas City regions and Minneapolis close to flat. Ranchland was the star, appreciating sharply on the back of strong cattle prices.
Underneath the steady headline, though, the strain is showing. Farm income kept slipping, faster in the crop-heavy northern Plains than in cattle country, and loan repayment weakened across the board. In the crop-concentrated Chicago, Minneapolis, and St. Louis districts, roughly 40% of lenders reported slower repayment, compared with under 25% in the Kansas City and Dallas districts. Government payments and cattle revenue are what kept the losses from being worse.
What it means: Land is steady for now, but the support is coming from livestock and program payments, not grain. If you are on the crop side, the softening in loan repayment is the number to watch.
The bottom line
Put the four together and they tell one story. The grain side is under margin pressure and is borrowing less, cattle and government payments are doing the heavy lifting, and land values and loan quality are holding up so far, with the biggest long-run question mark hanging over irrigated ground in the drier parts of the district.
It is a gradual softening, not a cliff, but it is the kind of trend worth watching as you head into 2027 renewals. If your operation leans on crops rather than cattle, or sits over a declining aquifer, sit down with your lender early and know your numbers before the conversation.
Source: Federal Reserve Bank of Kansas City, Center for Agriculture and the Economy (Agricultural Finance Updates and Economic Bulletin).