Low Commodity Prices Pushing Down Farmland Values

August 17, 2016 01:30 PM
farmland corn Minnesota MN crop tour 2015

Land values are being pushed down by low commodity prices, along with farmers’ income, according to two recent reports by Federal Reserve Banks.

Both the Federal Reserve Bank of Kansas City, Mo., and the Federal Reserve Bank of St. Louis reported lower farmland value.

Lower commodity prices has weakened farm income, worsened credit conditions and pushed down the value of nonirrigated and irrigated cropland by 3% and 5% from a year ago, according to the Federal Reserve Bank of Kansas City in its August report.

Irrigated cropland values have declined in each of the past six quarters, while nonirrigated cropland values have declined in four of the past six quarters, the report found.

The drop in income also affected credit, with 15  percent of bankers reporting that they denied more than 10% of applications for farm operating loans.

Another  report by the Federal Reserve Bank of St. Louis also said farmland values had deteriorated. It reported declining value for ranch and pastureland, which fell by 7.4%. Quality farmland value declined less than 1%, making it the fourth consecutive quarter of declining value, it said.

Agricultural land values are expected to decline again in the third quarter,  the bank said, based on a survey of 32 agricultural banks in the Eighth Federal Reserve District.

The report found that the financial condition of farmers borrowing money deteriorated during the last year and said tenant farmers with cash-rental arrangements are most exposed to a prolonged downturn in income. It was  based on a survey conducted from June 15 to June 30.


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Spell Check

Jordan, MN
8/18/2016 12:48 PM

  Two recent farmland auctions in southern MN are consistent with this article. Last week, a quarter section of very high quality land sold for $7,000/ac. Another 77 acre farm sold this week for $6,500/ac. Overall, there are very few farmland sales in 2016 compared to the previous few years. I suppose it's a lot easier to sell when someone is willing to pay $10,000/ac versus $7,000.