Soft landings are desired by airline travelers and economists. But in the case of farmland values, a soft landing is much more preferable than the bursting of some bubble. And when current data on farmland values is examined, it may seem the throttle is being pulled slowly back for a soft entry into price stability. No one is saying land values have stopped rising or are declining; but the rate of acceleration has slowed, and it may be an early indication that the exponential rise in farmland prices has moved into middle age, so to speak.
Commercial bankers throughout the Corn Belt have a vested interest in the price of farmland. They may carry a mortgage on it, finance the next buyer of it, or earn income from financial services provided to the owner of the farmland. They are tied in rather tight to the farmland market and have been reporting values of land transactions, price trends, loan rates, and creditworthiness of borrowers to the Federal Reserve Banks that shepherd the region.
Economist David Oppedahl says the value of good farmland is still on the rise, as he surveyed commercial bankers in the first quarter of the year. But he added, “Signs of moderation in farmland value gains emerged.” Oppedahl reported that land values rose 7 percent in the last three months of 2012, and said that was more than the succeeded months of 2013, “District agricultural land values rose 4 percent in the first quarter of 2013 relative to the fourth quarter of 2012, easing down from the quarterly increase of last year’s final quarter. However, the year-over-year increase in District farmland values was 15 percent in the first quarter of 2013, almost matching the annual gain of 2012.” That annual 2012 gain was 16 percent, reported by Oppedahl earlier this year.
Data compiled on farmland sales in Wisconsin for the period of January through March of this year actually showed a 3 percent decrease compared to the first quarter of 2012.
Oppedahl said, “For Illinois and Iowa, the increases in farmland values on a year-over year basis were close to those of the previous quarter, although these District states’ quarterly increases were softer than those of the last quarter.” Of the 219 bankers surveyed, he said 59 percent reported higher demand for farmland than a year ago, but there was also an increase in the amount of farmland available for sale as well.