Rural Bankers See Bearish Picture for Farmland Prices

October 19, 2018 04:00 AM
Farmland prices have declined by 4% in the past 12 months, according to Creighton University’s Rural Mainstreet Index (RMI) for October 2018.

Farmland prices have declined by 4% in the past 12 months, according to Creighton University’s Rural Mainstreet Index (RMI) for October 2018. The farmland and ranchland-price for October sank to 34.8 from 37.5 in September. This is the 59th straight month the index has fallen below growth neutral 50.

Future farmland values look to be just as bearish, according to the monthly survey of bank CEOs in a 10-state Midwest region. The bankers expect farmland prices to fall by another 3.2% over the next 12 months.

“More than ever, farmland values are extremely dependent upon quality, and location, location, location,” says Fritz Kuhlmeier CEO of Citizens State Bank in Lena, Ill.

In spite of waning farmland values, the rural economy is still in growth mode. The overall index expanded to 54.3 from 51.5 in September. This is the ninth straight month the overall index rose above growth neutral.

“Our surveys over the last several months indicate that the Rural Mainstreet economy is expanding outside of agriculture. However, the negative impacts of tariffs and low agriculture commodity prices continue to weaken the farm sector,” says Ernie Goss, who chairs Creighton’s Heider College of Business. 

Borrowing by farmers contracted for October as the loan-volume index declined to 60.0 from 65.3 in September. 

The employment gauge climbed to 65.7 from September’s strong 65.3. The Rural Mainstreet economy is now experiencing healthy job growth. Over the past 12 months, the Rural Mainstreet economy added jobs at a 1.6% pace compared to a lower 1.5% for urban areas of the same 10 states.
Meet the man behind the Rural Mainstreet Index: Ernie Goss.

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Spell Check

Mitchell, SD
10/22/2018 01:12 PM

  Oh my, oh my........SD banker here, and a former Farm Credit officer (PCA) in the 1980's. True, not yet as bad as the 1980's, but it better turn pretty darn soon, or it may be? It continues to amaze me that when one talks to any "one farmer", I'm not having any problems, but I know others that are. Maybe ought to look in the mirror? It would be one thing if just a commodity or two, but it appears pretty much across the board, grains, LS, milk, etc. The biggest difference is the interest rates.......but look out, they are on the move. I hope most have a vast majority of their debt locked into historically low rates. It also amazes me that one keeps reading these articles of land only down 3-4%, maybe extreme of 10%. WTF? I know several cases, more than one state, where from back in 2012-13-14, to now, the very best land is off 30%. If 10,000/ac now sells for 7,000/ac, is that not 30%......and that's on high quality land. Lesser quality, is off even more! They throw in all these rural "hobby farms", and the development land around major cities, into the "Mix".....well, excuse me, that is not the average crop ground. USDA and the boys that keep the stats, don't want to create a panic! Yes, some farms nearly debt free, some land owners (Non-farmers) nearly debt free, and that scews the averages. But more total debt in AG today than ever before, and interest rates are rising! The Big Boys, with the big acres and the big stuff, also have the heavy debts, they have the debt, and 3.00 corn, and 7.00 beans don't cover much. Restructure, put more debt on the RE? We tried that in the 80's!! If one can not cover basic op exp, and FL, how does one cover more term debt payments? The day is coming, best be equipped to survive. You can cuss the banker, they did that in the 80's also. Most of us never held a gun to one's head and said you need to borrow more? One can NOT borrow their way out of a mess. Hang on!!

Lee M Kissinger
10/19/2018 07:05 PM

  Well you know and we all know someone who just can't say no! Are you farmers or land speculators there are good farmer that do well and there are farmers that read magazines that think they are good but truth be told they are not the best and have bragging rights for a little while. it all comes down to one thing are you making money or not. you can't spend your way to profitability but many think that is the way to do it. You can say what you want but this is as bad or worse than it was in the 1980's they all swear it is not but we are not making it or can we with 300+ rent and expenses for fertilizer and inputs through the roof I don't care who you are or how good you think you are we need to get back what we have lost any other company would have filed for bankruptcy already! Why does the American farmer have to suck the hind teat everytime and be happy about it? Yet we produce for the world and get treated like nothing better than a slave!

cooper, IA
10/19/2018 08:12 PM

  Dear Kissinger. Yjos is NOTHING like the 1980s nowhere near as bad, DO you see corn piled on main street to rot? Not just one town but all towns. Do you see all the banks gone because most of the farms went back to the bank and then the bank had no revenue? That was what it was like then. Our land values dropped from 3 thousand an acre to 3 hundred an acre in a short time. That is a 90 percent loss in value currently the value loss is in the low single digits. Maybe you need to find a different profession if you think these times are like the 1980s.


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