Midwest and Mid-South: Farm Income Down, Farmland Values Up

05:47PM Feb 14, 2019
( )

Farmers continue to face declining farm income in the Midwest and Mid-South regions, according to the latest report from the Federal Reserve Bank of St. Louis. Yet, values for quality farmland, ranchland and pastureland all rose.

The Federal Reserve Bank of St. Louis, which is the Eight District, includes all or parts of seven Midwest and Mid-South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Lenders continue to report declines in farm income relative to a year earlier. The current index value marks the 20th consecutive quarter with a value below 100. Based on a diffusion index methodology with a base of 100, the fourth-quarter index value for farm income was 41. Expectations for farm income in the first quarter of 2019 were only slightly better with an index value of 48.

“We have heard rumors of large farmers filing for bankruptcy. Farmers in our area still have crops in the field,” according to a Missouri lender.

“Tariffs are beginning to take a heavy toll on local farmers and agricultural businesses in our region,” reported an Arkansas lender.

A Midwestern lender echoed that uncertainty. “There is uncertainty surrounding the grain and livestock markets. A lot of producers fear that our export markets will not return to normal,” according an Illinois lender.

Farmland Values Rebound

Despite expectations of declining land values over the past few surveys, quality farmland values rose 3.4% in the fourth quarter from a year earlier. Ranchland or pastureland values increased by 6.5% in the fourth quarter.

Cash rents for quality farmland rose 2.9% in the fourth quarter, following a 2% gain in the third quarter. Cash rents for ranchland or pastureland rose by less, 1.3%, after increasing by 0.8% in the third quarter.

This survey also polled bankers on the health of the rural economy in their region, the economic outlook for 2019 and expectations for farmland returns in 2019.

  • About two-thirds of bankers reported that local economic conditions were fair, while about a third reported that conditions were good.
  • Around two-thirds of bankers believe that local economic conditions will remain the same, while a third expect them to worsen in 2019.
  • For farmland returns, nine in 10 bankers expect farmland returns to be positive—greater than 0% but less than 5%.