The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Mike Walsten has covered major business trends in agriculture for more than 40 years.
The value of "good" agricultural farmland across the central Corn Belt declined 3% in 2015, according to the Federal Reserve Bank of Chicago. The bank's quarterly survey found farmland values slipped 1% lower during the fourth quarter compared to the previous quarter.
Leading the decline is Iowa, which is down 5% on an annual basis and down 3% on a quarterly basis. Illinois and Indiana report an annual decline of 4% with Illinois down 1% on a quarterly basis and Indiana down 2% on a quarterly basis. Michigan is down 2% on an annual basis but up 1% on a quarterly basis while Wisconsin is up up 2% on an annual basis and 2% on a quarterly basis.
This year's 3% decrease equals the 3% decline found by the bank survey in 2014. The two consecutive declines mark the first since the mid-1980s.
When adjusted for inflation, the district-wide decrease in farmland values for 2015 was actually smaller than the one for 2014 (because the inflation rate was lower in 2015), the bank notes. "Put in real terms, the decrease in the district’s farmland values from their peak in 2013 to 2015 was 7.5%. However, in 2015 the index of inflation-adjusted farmland values for the district was still 331 percent higher than at its trough in 1986." the bank states.
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I am actually surprised to see so little change given recent commodity price declines. Maybe it is too soon to tell given multi-year rental agreements, etc.
The banking industry has been playing the "pump it and dump it" program since before the Great Depression. Farmers who on their balance sheets, followed the pump it phase of valuation to $12,000/acre are now going to look like they are losing millions during the dump it phase. The answer is self financing and cautious valuations if borrowing. We are going to have another 1980s farm crisis, but rather than land owners, it will be a tenant farm crisis. Those farming 1000s of rented acres will hemorrhage money. Shutting the grain supply off to the masses will bring an importance back to the farming community. Everyone I speak with tell me farmers are too independent to organize and are busy trying to out run their neighbors and buy them out. We are headed to large corporate farming because farmers will not organize and shut down grain and livestock production. It is our own fault that markets are so cyclic.
We can sure see how much the AG industry means to the USA. Not a single presidential candidate has said anything about agriculture. When it is all in the hands of corporations the people will see the food prices rise much more. Just a thought.