(Adds Chicago Fed survey results, comment by Fed economist,
By Christine Stebbins
CHICAGO Aug 14 Farmland prices in the U.S.
Plains and Corn Belt states were steady to higher in the second
quarter despite lower grain profits as crop prices fell,
according to Federal Reserve Bank quarterly surveys issued on
Falling corn, soybean and wheat prices cut into crop
farmers' profits while the livestock sector benefited from
cheaper feed costs.
Along with lower incomes, bankers noted a sharp rise in loan
demand, but overall credit conditions remained strong, the banks
"Farmland values were partly buoyed by a spring rally in
corn and soybean prices, which occurred before these crop prices
started falling again in May," said the Chicago Fed, citing a 2
percent rise from the previous quarter and a 3 percent increase
from a year ago.
The Fed's Chicago district, which stretches from Iowa to
Michigan, is the top corn, soybean and hog producing area of the
Farmland prices are closely watched by Fed policymakers, ag
lenders and farm suppliers - from equipment makers to seed
dealers - since land is the basic collateral for most farm
In recent years, crop and farmland prices have set records
as a boom in biofuels and exports fueled demand. That ended last
fall as U.S. grain stocks rebuilt after a record drought. But
land auctions this spring have remained generally strong, easing
bankers' fears about a potential "farmland bubble" popping after
"Despite continued strength in the livestock sector,
district farm income remained well below year-ago levels due to
falling crop prices and poor winter wheat yields. Cropland
values generally held at high levels while strong demand for
high-quality pasture pushed ranchland values higher," the Kansas
City Fed said in its survey of 218 farm lenders in the central
Plains - a major producer of wheat, corn, and cattle.
The KC Fed said non-irrigated and irrigated cropland values
rose by less than 1 percent from the first quarter and were up 6
percent from a year earlier. Ranchland values were up more than
2 percent from the first quarter and up 9 percent from a year
"Lower crop prices will eventually translate into some type
of softening - we haven't gotten to that point," said Nathan
Kauffman, KC Fed economist and one of the survey's authors.
Farmers still have a lot of wealth and continue to drive
demand, Kauffman said.
Land values in the southern Midwest and mid-South - a grain,
cotton and livestock region - did not hold up as well.
The St. Louis Fed said in its survey of 45 farm lenders
cropland values were slightly lower in the quarter, down less
than 1 percent from the first quarter and down 3.5 percent from
a year ago.
Mid-South ranchland values fell 7.4 percent compared with
the previous quarter and were down 2.5 percent from a year
However, cash rents rose 4.9 percent from the first quarter,
with the average rent $191 per acre.
(Editing by Lisa Von Ahn and Matthew Lewis)