Has the pause button been pushed on the rapid ascent of farmland values? That may be a reasonable question when examining the recent trends throughout much of the Corn Belt, as recorded by the regional Federal Reserve Banks.
Prices of good farmland are higher than last year, as reflected by the double-digit jumps in recent years. But when prices are compared to prior quarters, the increases are not as striking. Although it is a small sample, the beginning of a trend may be apparent.
Federal Reserve Bank economists have regularly been surveying commercial bankers throughout their service territory about farmland values, credit conditions, and other factors reflective of the farm economy. Within the Corn Belt, the primary Federal Reserve banks are headquartered in Chicago, St. Louis, and Kansas City.
The Chicago Fed’s August Ag Letter indicates that for the second quarter of 2013, the value of “good” farmland was 17 percent higher than for the similar quarter of 2012. However, those values were steady, when the second quarter was compared to the first quarter of 2013.
The data comes from a survey of 211 commercial bankers, and the last time the value of farmland was steady in the quarterly surveys was in 2009. What is even more telling is that the 7 percent of bankers who believe land prices will rise was offset by a similar 7 percent believing them to fall. The remaining 86 percent of bankers in the Chicago Fed District anticipate no change in land values from the second quarter to the third quarter of the year.
The Chicago Fed serves the entire states of Iowa and Michigan, the northern two-thirds of Illinois and Indiana, the southeastern two-thirds of Wisconsin. Fed economist David Oppedahl said, “So, while the farmland values on a year-over-year basis still appeared to be soaring, changes in farmland values on a quarterly basis may be presaging shifts in the year-over-year pattern in the latter half of 2013.”
Additionally, he quoted one banker who said to look for land values to go down along with grain markets. And Oppedahl added, “The anticipation of lower crop revenues—especially when combined with potentially rising interest rates on farm loans—portended softness in future farmland values.”
The St. Louis Federal Reserve District has published its quarterly survey and reports that land values in the mid-South are still rising. Serving portions of IL, IN, KY, TN, MS, AR, and MO, the St. Louis bank reports quality farmland values averaged $5,672 in the second quarter of 2013, compared to $5,111 in the first quarter of the year.