Growth in Farmland Values Persists

December 6, 2013 06:14 PM
 
High Value Rent Considerations

Growth in farmland values persists but at a slower rate

For the past few years, farmland values have been on the up and up. According to reports from three Federal Reserve Banks, a  price plateau is on the horizon, though.

In the Midwest, the Federal Reserve Bank of Chicago reports that unfavorable weather conditions are effecting farmland values. On an annual basis, farmland values in the Seventh Federal Reserve District increased 14% for the period ending Sept. 30. "Good" agricultural land values in the five states (northern Illinois, the majority of Indiana, Iowa, southern Michigan and southern Wisconsin) showed only a 1% quarterly increase.

David Oppedahl, Federal Reserve Bank of Chicago senior business economist, says that the district’s quarterly uptick in farmland values occurred in spite of a downturn in grain prices.

"Better-than-expected crop yields for the district may have contributed to the momentum of its rising farmland values; however, in areas affected by back-to-back droughts, the loss of revenue from declines in crop prices and yields may have constrained farmland value gains," he says.

The Federal Reserve Bank of Kansas City says non-irrigated cropland values rose 19% compared with 2012. Irrigated cropland rose 21.5% and ranchland gained 15%.

The 210 bankers surveyed in the The Tenth Federal Reserve District (Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and the western third of Missouri) say that the demand for farmland outpaced supply, as fewer farms were for sale.

In the Eighth District (Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee), The Federal Reserve Bank of St. Louis says farmland values saw a 6% decrease from the second-quarter average. Yet on an annual basis, farmland values remain 9.1% higher than the previous year.

"Assuming some drop in net cash income, the implications are for a softening of real estate prices," says Joe Glauber, USDA chief economist. 

You can e-mail Sara Schafer at sschafer@farmjournal.com.

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