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

 

District change in “good” farmland values

• Quarterly (Oct. 1, 2014-Jan. 1, 2015): unchanged

• Annual (Jan. 1, 2014-2015): -3%

 

State change in “good” farmland values (previous quarter and year, respectively):

• Illinois: +1%; -3%

• Indiana: -3%; -2%

• Iowa: -1%; -7%

• Michigan: -1%; 0%

• Wisconsin: +2%; +2%

 

District-wide average interest rates and change from previous quarter

Variable rate loans

• Operating loans: 4.87%; down .02%

• Feeder cattle loans: 5.03%; up .02%

• Real estate: 4.61%; down .01%

 

Bankers in the Federal Reserve Bank of Chicago (covering all or portions of Illinois, Indiana, Iowa, Michigan and Wisconsin) saw an annual decrease of 3% in “good” farmland values for 2014, marking the first yearly decline since 1986. However, farmland values in the fourth quarter of 2014 remained largely the same as in the third quarter, said David Oppedahl, business economist, writing the bank’s AgLetter. Half of the respondents expected farmland values to fall during the January through March period of 2015, while only 1% remained hopeful that farmland values would rise in the areas surrounding their respective banks.

Lower corn and soybean prices have been primary factors contributing to the drop in farmland values. The impact of falling crop prices has been offset to some extent by buoyant returns for livestock producers throughout 2014.

Recent trends in agricultural credit conditions extended into the fourth quarter of 2014, and were in many ways quite different in the fourth quarter of 2014 than in the fourth quarter of 2013. Non-real-estate loan demand relative to a year ago was again higher. Repayment rates on non-real-estate farm loans were markedly lower in the October through December period of 2014 versus the same period of 2013, and rates of loan renewals and extensions were higher.

Given the changes to credit quality, there were tighter credit standards too. Thirty-one percent of the survey respondents reported their banks had tightened credit standards for agricultural loans in the fourth quarter of 2014 relative to the fourth quarter of 2013, and 69% reported their banks had left credit standards essentially unchanged.

Even with tighter credit standards, survey respondents noted only 1.4% of their farm customers with operating credit in 2014 were not likely to qualify for new operating credit in 2015.

Agricultural capital expenditures for land or improvements, buildings and facilities, machinery and equipment, and trucks and autos were all anticipated by survey respondents to be lower in the year ahead than in 2014.

Average interest rates on farm operating and real estate loans had eased to near-historic lows by the end of the fourth quarter of 2014.

To read the full report, click here.

Read also:

St. Louis FRB district: Incomes, spending lower
Land values up in Dallas FRB