The Chicago Federal Reserve issues a quarterly Ag Letter that recaps the major financial changes occurring in the states that it serves. The states comprise the 2 largest corn states (Iowa and Illinois) plus Indiana, Michigan and Wisconsin. Here are some of the major themes from their latest letter:
- Farmland values for the second quarter of 2014 actually increased about 3% year-over-year and about 2% from the first quarter of 2012. It appears most of this increase was driven by the increase in crop prices that occurred through May of this year. Of course, since then, crop prices have dropped dramatically so it will be interesting to see the third quarter report.
- Additionally, the very good margins in the dairy industry appears to have driven a 6% increase in value of farmland in Wisconsin. Iowa was the only state in the district to show a decrease on a year-over-year basis, although only 1%.
- Interest rates charged for real estate and operating loans stay steady at slightly less than 5%.
- However, the demand for farm operating loans appears to be up about 23 index points from the same period last year. In 2013, the index stood at 87 which means that 13% less bankers reported higher loan demand than the prior year. In 2014, the index stood at 110 due to about 30% of the bankers reporting higher operating loan demand and only 20% reporting lower demand.
- Last, bankers continue to report that the Farm Credit Bankers are very aggressive in matching loan offers to farmers with very high credit quality. The Ag Letter reported that amount of business won by Farm Credit Bankers was higher than normal. I have heard this from various bankers across the US so I would expect other district bankers reporting the same.