Bankers Grow More Bearish Farmland

Published on: 20:29PM Apr 16, 2015

Mike Walsten

Rural bankers are more bearish on farmland prices, but see higher cash rents, according to the most recent survey of rural bank CEOs and presidents conducted by Creighton University's Dr. Ernie Goss. The monthly Rural Mainstreet Index conductes the survey across a 10-state region from Colorado to Illinois. Goss found the farmland and ranchland-price index sank to 33.4 in April, down from March's very weak 39.4. (Fifty is considered growth neutral).

"Even through crop prices have stabilized, demand for farmland was weak, pulling agricultural land prices down again. This is the 17th straight month the index has moved below growth neutral," says Goss.
Even through farmland prices continue to decline, expected cash rents for non-irrigated cropland continue to rise, according to the survey. In January, bankers surveyed estimated 2015 cash rent would average $214 an acre. This month the average is pegged at $227.

According to Todd Douglas, CEO of First National Bank in Pierre, S.D., "With GPS-based yield mapping, we are seeing some of the smarter operators starting to figure out which land is making them money and which is not. So far when someone walks away from some poorer ground, there still seems to be a greater fool ready to step up and rent it."

The April farm-equipment sales index increased to a frail 15.6 from March's record low of 15.2. The index has been below growth neutral for 21 straight months. "With farm income expected to decline for a second straight year, farmers have become very cautious regarding the purchase of agricultural equipment," states Goss.

The overall Rural Mainstreet Index (RMI), which ranges between 0 and 100, climbed to 46.0 in April from 43.6 in March. "The stronger U.S. dollar continues to be a drag on the Rural Mainstreet economy. This month more than one-third, or 34.0%, of the bank CEOs reported the strong U.S. dollar was having a negative impact on their local economy. Gains in the U.S. dollar have made U.S. goods, especially agricultural and energy products, less competitively priced abroad," notes Goss.


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