The district covers all or portions of Illinois, Indiana, Iowa, Michigan and Wisconsin. District land values also declined in 2014, making it the first consecutive annual decline since the 1980s. Nearly 60 percent of the bankers who responded to the quarterly survey anticipated ag land values will decrease during the January-March period of 2016; none expected land values to increase.
Among the five states, only Wisconsin showed an annual increase in farmland values, up 2 percent. Fourth-quarter 2015 milk prices declined 16 percent, falling less relative to other commodities, and may have contributed to the state’s increase in farmland values toward the end of 2015.
State change in “good” farmland values (previous quarter and year, respectively):
- Illinois: -1 percent; -4 percent
- Indiana: -2 percent; -4 percent
- Iowa: -3 percent; -5 percent
- Michigan: +1 percent; -2 percent
- Wisconsin: +2 percent; +2 percent
Agricultural credit conditions continued to regress in the fourth quarter of 2015, with loan repayment rates down, and higher rates of loan renewals and extensions reflecting a tightened credit environment. The volume of the farm loan portfolio reported as having “major” or “severe” repayment problems rose to 5 percent in the fourth quarter of 2015, up 2.1 percent from a year earlier. Almost 2 percent of farm loan customers were not expected to qualify for additional operating credit for 2016.
Kansas City Fed: Ag land values, credit conditions weaken
Fourth-quarter 2015 farm income levels weakened in the Kansas City Federal Reserve district, pressuring farmland values and cash rents lower, according to the Federal Reserve Bank of Kansas City’s quarterly Survey of Agricultural Credit Conditions. The district covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico and the western third of Missouri.
The lone outlier in the declining farmland value trend was Oklahoma, according to the report, authored by Nathan Kauffman, assistant vice president and Omaha branch executive, economist Cortney Cowley and Matt Clark, assistant economist.
District-wide, irrigated cropland values have now fallen modestly in four consecutive quarters, and the value of nonirrigated cropland generally followed the same trend through 2015. The growth in the value of ranchland also stalled alongside sharp declines in cattle prices.
Farm credit conditions also deteriorated somewhat. Farm loan repayment rates slipped, while farm loan demand remained high. Commercial banks generally reported low delinquency rates on agricultural loans, but loan renewals and extensions increased. Bankers indicated they expect credit availability to tighten somewhat in the first quarter of 2016.
Interest rates for operating and intermediate-term loans rose slightly, but declined for farm real estate loans. Oklahoma and Missouri rates were higher relative to other states in the district.
Ag land values decline in St. Louis Fed district
Quality farmland values continued to decline, and after strengthening earlier in the year, ranchland or pastureland values also ended the year lower, according to a fourth-quarter 2015 ag bankers survey (PDF, 254KB) in the Federal Reserve Bank of St. Louis. The district covers all or parts of Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
In comparison, cash rents diverged, with farmland rental rates exhibiting a large decline, but ranchland or pastureland declining. Bankers surveyed for the latest Agricultural Finance Monitor expect the downward trends in land values to continue for the next three months.
District-wide land value changes compared to previous year
- Pastureland/ranchland: -5.3 percent
- Farmland: -2.5 percent
District-wide changes in average cash rents compared to previous quarter
- Pastureland/ranchland: +8.6 percent
- Farmland: -9.5 percent
Dallas Fed: Ag land values hold
In contrast to trends in many other parts of the country, land values in the Federal Reserve Bank of Dallas region were steady to higher in the fourth quarter of 2015. The district covers all or portions of Texas, New Mexico and Louisiana.
Irrigated cropland saw the largest increase, and land value increases in Texas were slightly higher than the average across the entire district, according to a quarterly ag bankers survey (PDF, 823KB). Most bankers expect land values to be stable or lower in the first quarter of 2016.
Fourth-quarter 2015 district-wide land value changes compared to previous year
- Dryland: +2.2 percent
- Irrigated cropland: +1.9 percent
- Ranchland: +1.9 percent
Loan repayment rates continued to decline on pressure from lower commodity prices, while loan renewals and extensions picked up. Overall, the volume of loans was down compared with a year ago, with the exception of operating loans, which increased in volume year over year this quarter. About 98 percent of bankers reported demand for dairy loans were steady to lower. Credit standards were mostly steady, with some tightening.
Pacific Northwest ag land values steady, but clouds forming
The old saying that “farmland is a good investment because they aren't making any more of it” seems to be holding true in the Pacific Northwest – at least for the time being – according to the latest Northwest Farm Credit Services Land Values Market Snapshot.
In the shadow of lower commodity prices and water supply concerns, limited availability of land for sale kept fourth-quarter 2015 Northwest land values stable. However, lingering drought concerns and falling commodity prices, negatively impacting net farm income, could provide downward pressure to land values going forward.
While preliminary land sale transactions verified during 2015 closely matched 2014 levels, the number of transactions has declined since 2012, reaching historically low levels. The lack of listings for good quality agricultural properties continues to hinder market activity, propping up values. FG
