Farmland Values Appreciate in Great Plains
May 21, 2014
Farmland Values in the Great Plains continued to rise despite falling grain prices and a dreadful year for the winter wheat crop in the region. Irrigated and nonirrigated farmland both increased from the first quarter last year rising 6.4% and 4.4% respectively. Kansas irrigated farmland increased 15.8% from last year, the largest increase for irrigated land. Oklahoma nonirrigated farmland increased 13.5%, the largest increase for non-irrigated land. Missouri and Nebraska fared worst in nonirrigated farmland, reporting an increase of 5.5% and a decline of 1.2% respectively. Nebraska and parts of Wyoming, Colorado, and northern New Mexico increased the least from the first quarter of 2013, increasing 2.3% and 5.5% respectively. Nonirrigated farmland did see a decline from the fourth quarter of 2013, falling 1.4% quarter-to-quarter. The fall in expected farm income was suggested as the reason for the decline. While crop prices have come down in the past year, input costs have remained relatively unchanged, squeezing farmers margins.
Source: Federal Reserve Bank of Kansas City Tenth District Agricultural Credit Conditions report
High operating costs and a decline in grain prices is expected to lead to lower farm incomes in 2014. Slightly more than 50% of bankers surveyed reported a moderate deterioration in the financial condition of farmers from last year. Farmers struggled to payoff operating notes from the 2013 season due to lower than expected crop prices. That led to an increase in requests for loan renewals, extensions, and carry-over debt in the first quarter of 2014.
Bankers reported that there was an ample supply of capital available for farm loans, and that they expect interest rates to remain steady through the second quarter. Little to no change was reported in collateral requirements despite the decline in loan repayment levels.
The outlook for the Tenth Federal District is positive for the remainder of the year. Despite a fall in grain prices, farmland values increased year-to-year, and the majority of bankers surveyed feel confident that land values will stay consistent throughout the remainder of 2014. Forecasts showing rain in the western Great Plains should give the district some much needed moisture and improve this year’s crop moving forward.
The Federal Reserve Bank of Kansas City’s fourth quarter survey of Farmland Values and Agricultural Credit Conditions Report is a summary of the Tenth District’s value of farmland, farm loan portfolio performance, and on-farm income. The Tenth District consists of Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico, and the western third of Missouri.
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