Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.
Farmland values increase during third quarter of 2009
Nov 23, 2009
Farmland values increased 2% during the third quarter of 2009 across the Chicago Federal Reserve's Seventh District, according to 225 surveyed agricultural bankers. The Seventh District includes Illinois, Indiana, Iowa, Michigan, and Wisconsin.
"Good" farmland has historically held its value more effectively than poor farmland. During the third quarter of 2009, good farmland increased 2%, while respondents forecast for fourth quarter values to be down on decreased demand from farmers and investors. The decrease in farmland demand can be attributed to the costly delay of the 2009 harvest across the Midwest and Great Plains.
During the third quarter of 2009, farmland in Iowa, Illinois, and Michigan increased the most; 4%, 2%, and 1% respectively. Indiana and Wisconsin experienced a decrease of 1% over the last quarter.
Even though Iowa farmland increased the most over the past quarter, it still decreased the most over the last 12 months. Iowa, Illinois, and Wisconsin experienced the largest decreases in farmland values over the past year at 7%, 4%, and 3% respectively. Overall, farmland across the Seventh District decreased 4% over the past 12 months.
27% of bankers responded that they have more funds available for loans compared to a year ago, while only 1% have less funds available. As agricultural interest rates have decreased to the lowest levels since 2004, 21% of respondents reported a decrease in repayment rates on loans, while 10% experienced higher repayment rates. 49% forecast a decrease in these repayment rates over the next three to six months.
69% of survey respondents forecast stable farmland values during the fourth quarter of 2009. As values stabilize, investment opportunity rises. We expect the long-term demand for farmland to continue.
During the fourth quarter of 2009, 37% of the respondents forecast that there will be fewer land sales compared to 2008's fourth quarter. The late harvest has set back many farmers and decreased the probability of expanding their farms by buying more land.
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