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KC Fed holds “more optimistic views on financial conditions”

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“As we assess broad conditions in agriculture, financial conditions specifically, it’s worth emphasizing that this outlook has been far improved from six months ago,” shares a Midwest based economist.

Nathan Kauffman, vice president and Omaha branch executive with the Federal Reserve Bank of Kansas City, spoke to the financial status of agriculture at the 75th annual National Association of Farm Broadcasting Convention.

Kauffman notes “four key developments in the pandemic.” Travel, supply chain disruptions, consumer spending, and trade greatly impacted the industry. They now lend to an “optimistic view on financial conditions,” as producers look toward a new year.

“The outlook we see going forward is still heavily dependent on the path of the pandemic. But in each of these indicators, you’ll see the return to something closer to pre-pandemic is more optimistic,” Kauffman says.

Kauffman adds, “I would not go so far to say this represents an optimistic outlook overall.” Commodity prices will determine agriculture’s outlook, according to Kauffman.

“The income environment, or profit opportunities, have still been relatively limited. Some industries have been doing better than others, but there has been general weakness in terms of prices relative to input costs,” Kauffman says. “As we go through loan renewal season, there are likely to be challenging conversations about profitability and what that looks like in 2021.”