(Updates with Chicago Fed survey, adds graphic)
By Christine Stebbins
CHICAGO May 15 Farmland prices in the U.S.
Plains and Midwest eased along with farm income in the first
quarter of 2014 and more softness was expected into the summer,
according to Federal Reserve Bank quarterly surveys issued on
Tighter profit margins for crop producers were a drag on
farm income in the first quarter despite improved profitability
in the livestock sector with lower feedgrain prices.
With lower income, more crop producers borrowed to pay for
operating expenses and bankers reported an uptick in debt
compared with last year. But concerns about a sharp drop in land
values after last autumn's 30 percent drop in corn prices
appeared to be easing.
"Even with the first quarterly decrease in five years, the
year-over-year change in District agricultural land values
managed to stay positive in the first quarter of 2014," said the
Chicago Fed, citing a 1 percent drop in values from the
preceding quarter but a 1 percent rise compared with a year ago
in its region, which is the top corn, soybean and hog producing
area of the United States.
The price of farmland is closely watched by Fed policy
makers, farm lenders and farm suppliers from equipment makers to
seed dealers since farmland is the basic collateral for most
A five-year boom in grain prices fed by exports and biofuels
ended last autumn after a bumper harvest. But land auctions over
the winter generally held up well, relieving bankers who have
fretted about a potential "farmland bubble" popping after the
"Low corn and soybean prices combined with relatively high
input costs tempered farm income and crop land values as spring
planting approached," the Kansas City Fed said in its survey of
lenders in the central and southern Plains states dominated by
wheat, corn, cattle and sheep producers.
The Kansas City Fed said non-irrigated farmland values
dipped 1.4 percent from the fourth quarter of 2013 while
irrigated farmland values rose 0.5 percent. But strong demand
for high-quality grazing pastures pushed ranch land values up
Compared with a year ago, average prices for non-irrigated
southern and central Plains crop land were up 4.4 percent, for
irrigated land up 6.4 percent and for ranch land up 8.6 percent,
the survey showed.
That resilience in land values in the face of lower grain
prices was also reflected in land prices in the southern Midwest
and mid-South, a grain and cotton area, surveyed by the St.
The St. Louis bank said its survey of 49 bankers in the
region showed average crop land values eased 6.3 percent from
the fourth quarter while grazing land prices remained steady,
reflecting the same trends in market prices and income seen in
Chicago and Kansas City surveys.
"Farm income in the first quarter turned out to be modestly
stronger than respondents expected three months earlier," the St
Louis Fed said.
(Editing by Jeffrey Benkoe, Alden Bentley and Matthew Lewis)