Farmland Values Bound Higher

December 10, 2011 12:29 AM
 

While your farmland might look the same as it did last year, it’s now worth a whole lot more. About 25% more, if you live in the Corn Belt states.

In November, the Federal Reserve Banks of Chicago and Kansas City, districts 7 and 10, released their third-quarter farmland data, which is provided by banks in the respective areas. Both districts saw some of the strongest value gains for good farmland since the late 1970s.

The Federal Reserve Bank of Chicago, which serves the northern two-thirds of Illinois, Indiana, Iowa, the lower peninsula of Michigan and southeastern Wisconsin, reports that favorable credit conditions and interest rates for agricultural producers boosted farmland values.

Farmland Values Bound Higher

Overall, better farming techniques and new genetics have increased output per acre, says David Oppedahl, economist for the Federal Reserve Bank of Chicago. "Higher prices and higher productivity have helped boost income for agriculture. Real farm net income is forecasted by USDA to be at the highest level in a decade."

Additionally, Oppedahl says, farmers are seeing positive financial indicators. "Net farm income is expected to be higher this winter than a year ago, farm balance sheets tend to be in stronger shape and credit conditions have improved," he says.

The Federal Reserve Bank of Kansas City, which serves Kansas, northwest Missouri, Nebraska, Oklahoma and, in the Mountain States area, Colorado, Wyoming and northern New Mexico, also cited a positive environment.

District farm incomes were higher than a year ago, despite the extensive drought in much of the area.

Other key value drivers, the Fed notes, were strong competition for the limited number of farms for sale and robust livestock demand.

Brent Gloy, Purdue University agricultural economist, says that in the short term, he expects farmland values to increase. "I think there is room for land prices to go higher. I think there are substantial risks associated with higher moves."

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