Rising production costs and falling crop prices curbed farm income growth in the first quarter of 2013, according to the Federal Reserve Bank of Kansas City’s quarterly Survey of Agricultural Credit Conditions.

High feed and forage costs continued to stifle profitability in the livestock sector, where losses were compounded by declines in livestock prices and the persistence of intense drought. Crop production expenses, particularly for seed and fertilizer, climbed higher as planting season approached. Crop prices were expected to fall throughout the growing season and wheat harvest, potentially restoring livestock and ethanol sector profits but restraining farm income from crop sales.

Land values in the seven-state Tenth Federal Reserve District climbed further in the first quarter. Cropland values rose 20% and ranchland values rose 14% year-over-year, a modest slowdown compared with the first quarter of 2012. Rising land values strengthened the balance sheet of farmers who own land but boosted debt levels for others financing farmland purchases.

The complete survey is available at www.KansasCityFed.org/agcrsurv/agcrmain.htm.

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