* Farmland in US Corn Belt up 19 percent in Q1 from year ago
* Midwest farmland rally "torrid" pace slows from Q4 2012
* Values soar while number of farms sold rise
By Christine Stebbins
CHICAGO, May 15 The price of prime farmland in
the U.S. Midwest grain belt was up 19 percent in the first
quarter compared with a year earlier, boosted by higher
commodity prices and net farm incomes, the Federal Reserve Bank
of Chicago said on Tuesday.
District land values extended their rapid rise at the start
of the year but fell "short of the torrid pace of 2011," with
prices for good agricultural land up 5 percent in the quarter
compared to the final three months of 2011, the Fed said in its
quarterly survey of 231 bankers in the district.
"The number of farms sold, acreage sold, and the amount of
farmland for sale over the winter and early spring rose more
sharply than a year ago. Almost two-thirds of the reporting
bankers anticipated agricultural land values to be stable during
the second quarter of 2012, while a third expected further
increases," the Fed said in a statement.
The Chicago Fed district includes the heart of the U.S. Corn
Belt states of Iowa, Illinois and Indiana, and parts of
Wisconsin and Michigan. Iowa and Illinois combined produce about
a third of the U.S. corn and soybeans, to help make the United
States the world's leading exporter of those key food and
The Kansas City Federal Reserve also released its quarterly
farmland survey on Tuesday, showing values up 25 to 32 percent
and at records highs, driven by the stronger grain prices and
Farmland values are closely watched by Federal Reserve
economists and by commercial bankers as a barometer of U.S.
banking assets and as a benchmark for agricultural balance
sheets. Farmland is a basic collateral for farm loans.
FARMERS IN BETTER SHAPE THAN IN 1980S
While the soaring farm land values of the past year have
raised concerns among U.S. ag bankers about a farmland bubble
like the one in the 1980s, when over-extended farmers lost their
land as interest rates jumped, farmers are in better financial
The debt posture of many farmers is far different now than
the 1980s. Net farm assets in the United States are expected to
rise to more than $2.2 trillion in 2012, according to the U.S.
Department of Agriculture.
Credit conditions in the Corn Belt have improved during the
"Both the index for the availability of funds for lending
and the index for loan repayment rates reached their highest
levels in the survey's history," the Fed said of its
three-decade old survey.
"Almost two-thirds of the reporting bankers anticipated
agricultural land values to be stable during the second quarter
of 2012, while a third expected further increases," the Fed
said, adding that many farmers continue to ease off demand for
loans by paying cash for both farmland and other essentials,
including equipment and buildings.
The Fed said that Iowa farmland values remained the
strongest in the district with a year-over-year increase of 27
percent. Land values in Illinois, Indiana, Michigan, and
Wisconsin were up 20 percent, 15 percent, 7 percent, and 13
percent, respectively. The quarterly increase in agricultural
land values for the District was 5 percent and in line with the
gains of the past year and a half, the bank said.
"Farmland cash rental rates in 2012 climbed 17 percent from
2011 for the District-the second-largest increase in the history
of the survey," the bank said.
There was less demand for loans by farmers, leading interest
rates to new survey lows of 5.34 percent on farm operating loans
and 5.08 percent on real estate loans as of April 1.
Looking forward, the Fed said, the volume of non-real-estate
farm loans was expected to decline from April through June of
2012 compared with the same period of 2011, entirely because of
responses from Illinois and Iowa. Bankers forecast weaker demand
for operating, feeder cattle, dairy, and Farm Service Agency
Loan growth was expected in farm machinery, grain storage
construction, and real estate in the second quarter of 2012
compared to the same period in 2011.