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November 2009 Archive for Your Precious Land

RSS By: Mike Walsten, Pro Farmer

Mike Walsten has covered major business trends in agriculture for more than 40 years.

Corn Belt Land Values Firm Versus Spring; Down Versus Year Ago

Nov 19, 2009

Mike Walsten

Two surveys by Federal Reserve banks cast a clearer picture of current trends in farmland values. And that picutre is one of a firming in land values versus the second quarter of 2009, but continuing weakness when compared to values of a year earlier when land values peaked during the third quarter. That's according to the just-released surveys from the Federal Reserve Banks of Chicago and Minneapolis.

The Chicago bank's survey found values fell 4% during the the third quarter compared to a year earlier. This marks the third quarter in a row the survey has found the value of farmland to be lower versus the comparable period of a year earlier. However, the survey also indicated values rose 2% when compared to the previous quarter. The Chicago bank serves the northern two-thirds of Illinois, northern two-thirds Indiana, all of Iowa, the Lower Pennisula of Michigan and southeastern Wisconsin.

On an annual basis, the value of land in Illinois is down 4%; down 2% in Indiana, down 7% in Iowa, unchanged in Michigan and down 3% in Wisconsin. The value of land in Illinois is up 2% compared to the previous quarter, down 1% in Indiana, up 4% in Iowa, up 1% in Michigan and down 1% in Wisconsin. More of the survey respondents expect farmland values will slide than gain during the fourth quarter of 2009. However, 69% of those surveyed expect land values to remain stable during the fourth quarter -- 29% expect land values to decline while only 4% anticipate land values will increase.

Please click here for the full report from the Federal Reserve Bank of Chicago.

The Federal Reserve Bank of Minneapolis reports farmland values and cash rents decreased slightly during the third quarter of 2009 when compared to a year earlier. The Minneapolis bank serves bankers in Minnesota, North Dakota, South Dakota, northwestern Wisconsin and the Upper Pennisula of Michigan.

The survey found the value of non-irrigated farmland declined 6% in the third quarter compared to a year earlier; irrigated farmland rose 5% and ranchland dropped by 7%. It said average cash rents for non-irrigated farmland slipped 3% while cash rents for irrigated farmland dipped 1% and rents for ranchland declined 4%.

Please click here for the full report from the Federal Reserve Bank of Minneapolis.

If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

 

 

Land Values Stabilize In Central, Southern Plains

Nov 13, 2009

Mike Walsten

Farmland values held steady during the third quarter versus the previous quarter across the Central and Southern Plains, according to ag bankers surveyed by the Federal Reserve Bank of Kansas City. The Kansas City Fed serves bankers in Kansas, northwest Missouri, Nebraska, Oklahoma, and the mountain states of Colorado, northern New Mexico and Wyoming.

Compared to the previous quarter, the value of non-irrigated cropland remained flat while the value of irrigated cropland slipped less than 1%. Ranchland values were 1% lower when compared to the previous quarter, due mostly to declines noted in Kansas and Nebraska. The value of Oklahoma ranchland actually rose in the third quarter compared to the second quarter as drought conditions within the state eased.

The value of ranch and cropland has slipped when compared to values of a year earlier, the survey states. It shows the value of non-irrigated cropland has declined 1.7% while irrigated cropland is down 3%. Ranchland values have fallen 4.2% on an annual basis. There are exceptions, however, as the survey indicates the value of non-irrigated cropland in Kansas rose 2.3% during the third quarter when compared to values a year earlier. Bankers in Northwest Missouri indicated values are up a slight 0.2% in the third quarter compared to values the previous year. Non-irrigated cropland values are down 1.6% versus a year earlier in Oklahoma, down 4.8% in Nebraska versus the previous year and down 5.5% in the Mountain States of Colorado, northern New Mexico and Wyoming.

Survey respondents reported a limited number of sales have occured during the quarter. A majority of the bankers responding to the survey said they expect farmland values to hold steady over the next three months.

Click here for the complete survey.

If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

 

 

Income Rebound Needed To Ward Off Ag Credit Problems

Nov 10, 2009

Mike Walsten

Problems in agricultural credit could escalate in 2010-2011 unless there is a rebound in net income next year, warns Dr. Danny Klinefelter, Texas A&M University professor and extension economist. The direction in interest rates and land values will be key, too, he states, but it really starts with net income. And if net income again proves weak, that could forecast further weakness in land values.

"The question is whether the drop in net farm income from $87 billion in 2008 to a forecasted $54 billion in 2009 is an aberation or the beginning of an extended downturn. If net farm income remains below $60 billion in 2010 and 2011, there will be problems. If it falls below $50 billion, the problems will be serious," he states.

He is deeply concerned the financial problems experienced by livestock producers in 2009 could escalate into wider credit problems for ag lenders in 2010-2011. "The reality is that there has been little involuntary exit from agriculture in the last four or five years," he says. "Unfortunately, extended boom periods tend to be followed by a cleansing period of about three years and a hangover effect can extend beyond that," he states.

Watching net income trends can also be a forecasting tool for land values beyond serving as a measure of the overall financial health of agriculture. Klinefelter notes that the ratio of debt to income flashed a warning as early as 1976 that forecast the eventual downturn in land values in the 1980s. The debt-to-asset ratio did not issue a warning until 1981. In 1976, the debt-to-income ratio exceeded 4% and rose to a peak of 13.1% in 1983 before falling back under 4.0 in 1987 (the year land values bottomed). The ratio did not exceed 4% again until 2002 but it fell back in 2003 and remained under 4% until 2009. The ratio is forecast to be exactly 4% for 2009.

I discuss the debt-to-income versus debt-to-asset ratio issue in my most current LandOwner Newsletter. If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Meanwhile, if you're interested in Klinefelter's entire discussion on the agricultural credit situation, click here.

 

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