Federal Reserve Banks provided land value and credit condition summaries from fourth-quarter 2014 ag lender surveys. As always, state and district averages may not reflect local conditions.
Fourth-quarter 2013 average farmland values in the Federal Reserve Bank of Chicago (covering all or portions of Illinois, Indiana, Iowa, Michigan and Wisconsin) were up 3% on the quarter and 5% from a year ago. However, farmland value growth appears to be slowing, and some areas in even saw declines in farmland values, as corn and soybean prices tumbled from a year ago, according to David Oppedahl, business economist. The annual increase was the smallest gain since 2009 and the second-lowest gain of the past decade.
A majority of respondents anticipated farmland values to remain stable during the first quarter of 2014, but the rest of the respondents’ expectations tilted toward decreases in farmland values during this period.
Ag credit conditions weakened compared to a year earlier. Repayment rates on non-real-estate farm loans were lower, and rates of loan renewals and extensions were higher. Non-real-estate loan demand picked up from a year ago, as farmers had relatively more working capital during the intervening quarters.
Credit availability was somewhat more restricted than a year earlier, and 6% of reporting banks required larger amounts of collateral to qualify for non-real-estate farm loans during the October through December period of 2013 relative to the same period of a year earlier; 1% required smaller amounts. According to survey respondents, over 1% of their farm customers with operating credit in 2013 were not likely to qualify for new operating credit in 2014. In Wisconsin, over 3% were unlikely to qualify again.
In a major reversal from a year ago, farmers’ capital expenditures – specifically, expenditures on land or improvements, buildings and facilities, machinery and equipment, and trucks and autos – were expected by survey respondents to be lower in the year ahead. Over half of the responding bankers forecasted lower levels of capital purchases in each of these categories in 2014 than in 2013, and less than 10% forecasted higher levels.
As of Jan. 1, 2014, the average interest rate for farm operating loans edged up to 4.99%. Similarly, the average interest rate for agricultural real estate loans rose to 4.94%. The farm operating loan interest rate was still below its level of a year ago, whereas the farm real estate interest rate had matched its level of the second quarter of 2012.