CHICAGO Feb 12 Farmland values in the U.S.
central Plains rose 2 percent in the fourth quarter of 2009 as
crop prices climbed while ranchland values fell with livestock
markets, the Federal Reserve Bank of Kansas City said Friday.
The Fed's tenth district is a leading U.S. producer of
cattle and wheat, corn and other top row crops. It stretches
across Colorado, Kansas, Nebraska, Oklahoma, Wyoming and parts
of New Mexico and Missouri. So land values, the main collateral
for most farm loans, are widely watched as an economic gauge.
"More district bankers reported stronger farm incomes due
to a harvest rise in crop prices and above-average yields.
Stronger crop prices at the end of the year underpinned a rise
in both nonirrigated and and irrigated cropland values during
the quarter, pushing farmland values above year-ago levels,"
the Fed said in its quarterly survey of regional bankers.
"In contrast, anemic profit opportunities in the livestock
sector placed downward pressure on ranchland values. Ranchland
values slipped below year-ago levels during the quarter as
contractions in the livestock sector dampened demand for
pasture ground," it said.
The Fed estimated the value of nonirrigated crop land rose
2.3 percent from a year earlier, with irrigated up 1.4 percent.
But ranchland values fell 2.2 percent, the Fed said.
"We saw the rebound in commodity prices and that was
lifting up farmland value. At the same time we saw improvements
in farm credit conditions -- higher loan repayment rates, lower
extensions and renewals, and bankers were expecting increased
capital spending," Jason Henderson, vice president with the
Kansas City Fed told Reuters.
"Some components of the livestock sector are still going to
be losing some money in the first and second quarters. But I
think by the end of the year the livestock sector will be
posting some profits," Henderson said. "I think the worst is
behind us in terms of the farm sector right now. It looks like
2010 will be a much better year."
U.S. net farm income fell 35 percent to $56 billion in 2009
from a record high in 2008 as grain prices soared. The U.S.
Agriculture Department on Thursday forecast 2010 farm income at
$63 billion, up 12 percent.
Fewer farmers were selling farmland in the Plains late last
year, with the limited supply contributing to stronger values,
the Fed survey said. Slower sales reflected cooling demand from
the housing and recreation industries.
District bankers noted higher loan repayment rates and
fewer loan renewals and extensions. "Collateral requirements
remained steady but elevated," the Fed said. "Several contacts
reported that farmers increased their use of vendor credit for
the purchase of crop inputs and grain production equipment."
During the fourth quarter, the loan repayment index rose
for the first time in over a year, the Fed said. Farm interest
rates remained historically low with real estate loans at 6.7
(Reporting by Christine Stebbins; Editing by David Gregorio)