February 23, 2009
Regional US farmland values see first decline in decade
Farmland values in Iowa and states surrounding Lake Michigan saw their first quarterly decrease in a decade, according to the Chicago Federal Reserve Bank's February AgLetter.
The quarterly decline was only the second since 1986 for overall land values in the Fed's seventh district, which encompasses most or all of Iowa, Wisconsin, Illinois and Indiana.
Prices for "good" agricultural land in the Fed's seventh district did see a 5 percent increase for the year, but that was the lowest increase since 2001, said AgLetter author David B. Oppedahl, a Chicago Fed business economist.
Given a gloomy economic outlook, 35 percent of respondents to the Fed's survey expected land values to decrease through March 2009. Only 4 percent expected an increase, while 61 percent of respondents expected the values to remain stable.
Among the conditions fuelling respondents' sentiment, Oppedahl listed the 11.5 percent decrease in estimated value of crop production in 2009 from the year prior, in which crop value grew 21 percent year-over-year. In 2009, the value of livestock production is projected to fall to US$132 billion from US$143 billion in 2008.
Net farmer income for 2009 is seen at US$71.2 billion, down 20.3 percent from the year prior, Oppedahl said, citing US Department of Agriculture data.
But the news was not all negative for farm country.
Despite 22 percent of respondents increasing the amount of collateral required for agricultural loans in the fourth quarter of 2008, increases in loan volumes were forecast for operating loans, farm machinery loans, and loans guaranteed by the Farm Service Agency.
Loan repayment rates in the fourth quarter of 2008 improved from a year ago, survey respondents said.
Still, 19 percent of respondents expected the volume of agricultural real estate mortgages to shrink, the AgLetter said. Those expecting higher real estate loan volumes totalled 15 percent.
Volume decreases were also anticipated for feeder cattle, dairy, and grain storage construction loans, Oppedahl said.
