Midwest Farmland Values Increase

The year-over-year increase in farmland values was 4% in the first quarter of 2010 for the Seventh Federal Reserve District, which includes northern Illinois, Indiana, Iowa, Michigan and Wisconsin, the Federal Reserve Bank of Chicago reports.

There was also a quarterly increase of 2% in the value of “good” agricultural land, according to the April 1 surveys. At 1%, the growth in District farmland cash rental rates slowed down dramatically from 2009. The demand to purchase farmland during the first quarter of 2010 strengthened from a year ago. A rising share of purchases by farmers buoyed this demand. However, the amount of farmland for sale, the number of farms sold, and the acreage sold weakened in the first three months of 2010 relative to the same period in 2009. The vast majority of the bankers anticipated stable land values during the second quarter of 2010.

Trends in agricultural credit conditions were unchanged during the first quarter of 2010. There was stronger demand for non-real-estate farm loans and greater availability of funds for lending compared with the same period in 2009. Loan repayment rates were lower, while renewals and extensions of agricultural loans were higher. Interest rates on farm loans continued to move lower, averaging 6.13% for new operating loans and 6.04% for real estate loans. Loan-to-deposit ratios averaged 73.7% more than 5% under the level preferred by the respondents.

Agricultural land values increased 4% for the first quarter of 2010 compared with the first quarter of 2009. However, the year-over-year gains in the value of “good” agricultural land were restricted to the southern part of the District. Farmland values increased 4% in Illinois, 7% in Indiana, and 8% in Iowa. Wisconsin farmland values decreased 1%. For the first quarter of 2010 relative to the fourth quarter of 2009, District farmland values rose 2%, with only Illinois having an increase of less than 2%.

While farmland values edged higher, cash rental rates for agricultural land plummeted, rising just 1% in 2010. Cash rental rates in Illinois were unchanged from 2009. The rest of the District saw increases in cash rental rates: 3% in Indiana, 1% in Iowa, and 8% in Wisconsin.