A summary of the Federal Reserve Bank of Chicago (covering all or portions of Illinois, Indiana, Iowa, Michigan and Wisconsin) third-quarter 2014 ag bankers survey:

 

Change in “good” farmland values (July 1-Oct. 1, 2014)

• Quarterly (July 1-Oct. 1, 2014): -2%

• Annual (Oct. 1, 2013-2014): 0%

 

District-wide average interest rates

Variable rate loans

• Operating loans: 4.89%

• Feeder cattle loans: 5.01%

• Intermediate-term loans: 5.64%

• Real estate: 4.62%

 

The two-year downturn in crop prices finally extinguished the trend of rising farmland values that had prevailed since the fourth quarter of 2009 in an area covered by the Federal Reserve Bank of Chicago.

Bankers in the district (covering all or portions of Illinois, Indiana, Iowa, Michigan and Wisconsin) reported farmland values were down 2% in the third quarter of 2014, the largest drop since the end of 2008 (and only the third quarterly decrease since then).

Land values were unchanged on a year-over-year basis, added David Oppedahl, business economist, writing the bank’s AgLetter. Declines from a year ago in “good” agricultural land values for Illinois and Iowa were offset by increases for Indiana and Michigan; meanwhile, Wisconsin farmland values remained the same.

While lower corn and soybean prices meant declining profits for crop producers, livestock profits improved in the third quarter because of higher livestock product prices and lower feed costs. Still, the continuing recovery of the livestock sector could not overcome the losses of the crop sector in most of the district, and could not prevent lower readings on farmland values in many places. More than half the bankers responding to the survey expect a fourth-quarter drop in farmland values.

Agricultural credit conditions were pulled in different directions relative to a year ago. Repayment rates for non-real-estate farm loans were lower, and loan renewals and extensions were higher.

The index of loan demand climbed to a level not reached since early in 2007. Collateral requirements for loans tightened (10% of the respondents reported that their banks required more collateral; less than 1% reported requiring less). Quarterly average interest rates on farm operating and feeder cattle loans remained close to their record lows; interest rates on farm real estate loans moved to near record low.

To read the full report, click here.