Ag Bankers Survey:
Farmland Values Up, In Certain Areas
The latest survey of agricultural lenders in the Seventh Federal Reserve District reported that lower milk prices took it’s toll on farmland values in Wisconsin compared to a year ago, while the rest of the Midwest saw a substantial increase.
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Based on a questionnaire of 198 rural bankers, the quarterly agricultural land values for the second quarter of 2010 rose 6% from the same time last year in the district. But the value of “good” farmland was unchanged from the first three months of the year. “Wisconsin was the only state to have lower farmland values compared with those from a year ago (at 1% below 2009) reflecting the struggles of the dairy industry, while values in Illinois, Indiana, and Iowa were up,” said Reserve Economist David Oppedahl. “The changes occurred due to the weakness in farmland values during the second quarter of 2009.” Compared to the first quarter of this year, Wisconsin and Illinois had quarterly increases, while Indiana and Iowa farmland values were unchanged for the second quarter of 2010. The bankers indicated that location has been a major determinant for farmland values this year. There have been reports of prices boosted by bidding between farmers for desired parcels of farmland. However, higher quality land has tended to gain the most in value over the longer term. The USDA’s projected corn and soybean crops are also convincing bankers that farmland values will continue to be in good demand. And this year’s higher livestock prices have provided an additional boost to farm income in the district. |
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Meanwhile, Oppedahl said there were some signs of improvement in agricultural credit conditions for the district during the second quarter.
Wisconsin and Indiana saw drops in non-farm loan demand, in contrast with the other states. Collateral requirements for loans were stiffer at 28% of the reporting banks. And interest rates on agricultural loans edged down at 6.12% on average.
Looking ahead, agricultural loan volumes were anticipated to remain about the same for the third quarter of 2010 compared with the same quarter last year. For the period from July through September, 20% of the responding bankers forecasted farm non-real-estate loan volume to be higher than the previous year, while 18% forecasted lower volume. ◆