By Christine Stebbins
May 16 Farmland prices in U.S. Midwest Corn Belt
states in the first quarter of 2013 rose 15 percent compared to
a year ago as demand for land remained strong but the frantic
pace of recent gains slowed down, the Federal Reserve Bank of
Chicago said on Thursday.
The Chicago Fed's quarterly survey of 219 bankers also
showed prices of good farmland rose 4 percent in the first
quarter of 2013, from the fourth quarter of 2012. That compares
to a 5 percent gain over the same period a year ago.
"Signs of moderation in farmland value gains emerged," the
bank said of its district, which includes most of Iowa,
Wisconsin, Michigan and northern Illinois and Indiana. "That
said, the year-over year increase in agricultural land values
was 15 percent in the first quarter of 2013, nearly matching the
annual gain of 2012."
The land price trends mirror what was reported on Wednesday
by the Kansas City and St Louis Federal reserve banks for the
first quarter. The Kansas City district, like the Chicago Fed's
district, are closely watched as barometers of the overall farm
economy, one of the bulwarks of the U.S. economy.
The U.S. Agriculture Department estimates that U.S. farm net
asset values will surpass $2.4 trillion in 2013, with more than
80 percent of that value tied up in farm land.
The Chicago Fed's district is dominated by corn and
soybeans, the two biggest row crops in the United States, but is
also home to a big hog and dairy industry. Such livestock
producers have felt the strain from record grain prices in
recent years and some of that strain on farm finances may have
carried over to weakness in land values. Pockets of the Midwest
saw some land values ease, with Wisconsin land prices easing 3
percent from year-ago, the Chicago Fed said.
"Even though the numbers remain pretty large for much of the
district there were some pockets that were starting to show
decreases in land values," David Oppedahl, the bank's economist
in charge of the survey, said in an interview. "Whether that's
just an aberration or not is yet to be seen."
"The weakness in some sectors like dairy might account for
part of that and the general trends in prices over the next
season are looking to be lower. So there's not going to be as
much support for higher farmland values going forward," he
Overall district land values were steady to higher on the
prior quarter and a year ago, the survey said, buoyed by record
grain prices and crop insurance payments.
"There was higher demand to purchase farmland in the three-
to six-month period ending with March 2013 compared with the
same period a year ago," the Chicago Fed said. "The supply of
farmland was higher too."
A little more than one-third of survey participants reported
that farmers increased their share of farmland acres purchased
in the three- to six-month period ending in March 2013 versus
the same period a year earlier, while 62 percent saw no change,
according to the bank survey.
Looking ahead, the Chicago Fed said that lower crop prices
could slow the upward trend in farmland values. For the second
quarter of 2013, 19 percent of bankers surveyed predicted
farmland values to increase, while 4 percent expected them to
decrease; the vast majority anticipated farmland values to be
That outlook was based on recent favorable, wet weather that
has replenished soils and sub-soil moisture throughout most of
the northern Corn Belt, the bank said.
"Heavy precipitation has delayed planting this spring, in
sharp contrast with last year, when planting occurred ahead of
schedule. That said, the rains have revitalized much of the
subsoil. During last year's drought, subsoil moisture played a
key role in preventing even deeper losses in agricultural
output," the bank noted.
The continuing strength in Corn Belt farmland prices kept
improving the values for cash rents in the district and overall
credit conditions for farmers.
"At 161, the index of funds availability nearly matched last
year's record, with 61 percent of the survey respondents
reporting their banks had more funds available to lend and under
1 percent reporting their banks had less. The index of repayment
rates for non-real-estate farm loans moved up to 143 for the
first quarter of 2013 - its highest value since setting a new
high a year ago; 47 percent of the responding bankers reported
higher rates of repayment and 4 percent reported lower rates,"
the Chicago Fed said.