At 25%, the year-over-year gain in agricultural land values in the third quarter of 2011 for the Seventh Federal Reserve District was the largest in more than three decades. Iowa values topped all Chicago Fed states, up 31% from Oct. 1, 2010, to Oct. 1, 2011. Indiana values rose 29%, Illinois 23%, Wisconsin 17% and Michigan values rose 16%. The quarterly increase in good farmland, at 7%, matched the highest level since the late 1970s, according to a survey of 216 bankers.
Demand for farmland this fall and winter looks to remain strong. About 60% of respondents expect higher demand for land among farmers; 41% expect greater demand from non-farm investors.
A slide in corn and soybean prices this fall did not hamper optimism for farm incomes, as 74% of responding bankers expect higher net cash earnings for crops in the next three to six months. Hog, cattle and dairy farmers were expected to see higher earnings this winter as well, due to declined feed costs.
Agricultural credit conditions continued to improve across the district in the third quarter. Notably, interest rates on farm loans trended below the previous quarter’s record lows. As of Oct. 1, the district average for interest rates on agricultural real estate loans was 5.36%. Rates for operating loans fell to 5.66%, on average, for the district. Iowa had the lowest rate for farm mortgages, 5.24%, while Indiana had the lowest rate for operating loans, 5.44%.