Agricultural Credit Conditions in the Tenth District
Agricultural credit conditions in the Tenth District remained subdued, but deterioration slowed in the third quarter. As row crop prices increased during recent months, farm income and loan repayment rates declined at the slowest pace since early 2024 across most of the region. Although credit conditions remained tight, problem loan rates were steady, and the share of lenders reporting severe farm loan portfolio stress remained limited.
Despite tight farm finances and slightly higher interest rates, cropland values remained strong, and growth in ranchland values was notable.
Farm Finances and Credit Conditions
Deterioration in farm financial conditions eased alongside higher crop prices. The pace of decline in farm income slowed for the fourth consecutive quarter (Chart 1). Cattle prices remained strong despite declining slightly in recent months, and crop prices increased to their highest level since 2024, likely boosting revenue for crop farmers.
Conditions in Oklahoma tightened, with the pace of decline in farm income slowing in all states except Oklahoma (Chart 2, left panel). Over 40% of lenders in Oklahoma reported that farm income was lower than a year ago, up from 10% in the previous quarter (Chart 2, right panel). High cattle prices had supported farm income in the state during recent months, but respondents highlighted growing concerns about drought and rising costs.
Alongside a slower decline in farm income, deterioration in agricultural credit conditions remained modest. District lenders reported that loan repayment rates declined only slightly from a year earlier (Chart 3, left panel). Approximately 30% of Oklahoma lenders reported that repayment rates were lower than a year ago, compared with about 15% in other states (Chart 3, right panel).
Problem loan rates were steady and remained modest for most lenders. The share of lenders with more than 10% of their farm loan portfolio on the watch list fell slightly from around 30% in 2025 to about 25% in 2026 (Chart 4, left panel). However, the share of lenders with 5% to 10% of their portfolio on the watch list rose slightly over the same period. The share of lenders with loans on the classified list remained nearly unchanged (Chart 4, right panel).
Liquidation to improve balance sheets was also steady and remained minimal for most lenders. A quarter of lenders reported they had no farm borrowers planning to sell mid- to long-term assets to improve working capital, and another quarter had less than 5% of borrowers with any liquidation plans (Chart 5). Only about a fifth of lenders reported that more than 10% of their farm borrowers were planning to sell assets, similar to a year ago.
With some easing in financial pressures in recent months, growth in loan demand showed signs of cooling. The pace of increase in demand for non-real estate farm loans was similar to the previous quarter and slower than recent years (Chart 6). Consistent with historical patterns, lenders also reported that fund availability had become more balanced alongside softer loan demand.
Interest Rates and Farmland Values
Growth in loan demand also eased alongside a slight increase in farm loan interest rates. Average interest rates on farm loans edged up from the second quarter to about 7% for real estate loans and 7.5% for operating loans (Chart 7). The increase was broad...