The latest AgLetter from the Federal Reserve Bank of Chicago does not paint a rosy picture of the farm economy in its territory. Farmland values across the Chicago Federal Reserve District are down 3 percent compared to year ago levels, caused by drops of 5 percent in Iowa and Michigan, and decreases of 2 percent in Illinois and Wisconsin. Only Indiana posted land values that were slightly higher than year-ago levels. However, there was no drop in the value of “good” district agricultural land in the second quarter compared with the first quarter.
Fed economist David Oppedahl says corn and bean prices have become a drag on land values, and he adds that plentiful supplies and softer demand will keep downward pressure on farmland values.
Meanwhile, credit conditions in the region worsened April through June, with a drop in repayment rates on non-real estate loans. The repayment rate would have been flat were it not for the dairy impact of Wisconsin, where 55 percent of lenders reported lower repayment rates. Only 3 percent of Wisconsin lenders indicated that rates were higher.
Operating loans and loans guaranteed by the Farm Service Agency are the only categories expected to experience growth in the period of July through September. The tone of lenders responding to the Fed survey communicated deep concerns for agricultural producers, especially if livestock and dairy prices do not increase soon and losses continue to mount.
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