CHICAGO — For the eighth consecutive quarter farmland values in the Seventh Federal Reserve District remained relatively stable.

The Federal Reserve Bank of Chicago recently released its quarterly agricultural newsletter for the district that includes the northern two-thirds of Illinois and Indiana, all of Iowa, Michigan’s Lower Peninsula and the southern two-thirds of Wisconsin. The district produces over 40 percent of U.S. corn, soybeans and hogs.

The information was collected via a survey of 188 agricultural bankers across the district.

Overall farmland values in the district were up 1 percent from a year ago and 1 percent lower in the third quarter of 2018 than the second quarter. This marked the first quarterly decline in the district’s farmland values since the fourth quarter of 2016.

Illinois saw a 1 percent decline from the second to third quarter and year-over-year.

Indiana farmland values dropped 2 percent from the second to the third quarter but were up 1 percent from 12 months ago.

Iowa’s farmland values were down 1 percent from the second to third quarter and increased 1 percent from 2017.

The biggest jump was in Wisconsin where farmland values are up 4 percent from a year ago, and down 1 percent from the second quarter.

Almost two-thirds of survey respondents expected the district’s farmland values to be stable during the fourth quarter of 2018, but 32 percent of them expected a decrease in farmland values in the final quarter of this year and only 2 percent expected an increase.

“Agricultural land values would have experienced more downward pressure in the absence of exceptional yields,” said David Oppedahl, Chicago Fed senior business economist and AgLetter author.

In 2018, district-wide corn and soybean yields jumped to all-time highs — 198 bushels per acre for corn and 59 bushels per acre for soybeans.

According to U.S. Department of Agriculture forecasts, the five district states’ harvest of corn for grain in 2018 would increase by 1.5 percent from 2017 and their soybean harvest would surge by 8.7 percent from the previous year, setting a new record.

For the third quarter of 2018, corn prices were 1.9 percent higher than a year ago, based on USDA data. But soybean prices were 5.6 percent lower than a year earlier.

Accounting for larger supplies of crops and trade tensions, the USDA revised its price estimates for the 2018-2019 crop year to a range of $3.20 to $4 per bushel for corn and a range of $7.60 to $9.60 per bushel for soybeans.

When calculated with the midpoints of these price intervals, the projected revenues from the 2018 district corn and soybean harvests would be up 8.8 percent and 0.1 percent from 2017, respectively.

Credit Conditions

Agricultural credit conditions for the district deteriorated again in the third quarter of 2018. For the fifth quarter in a row, the availability of funds for lending by agricultural banks was down relative to a year ago. Yet, for the third quarter of 2018, the demand for non-real-estate farm loans was higher than a year earlier.

“These results helped explain how the average loan-to-deposit ratio for the district established a new record of 79.4 percent. Moreover, repayment rates for non-real-estate farm loans were lower in the third quarter of 2018 relative to the same quarter last year, and loan renewals and extensions were higher,” Oppedahl said.

Average interest rates on agricultural loans moved up some during the third quarter of 2018.

Looking Ahead

Nearly two-thirds of survey respondents predicted farmland values to be stable in the fourth quarter of 2018, while 32 percent of responding bankers expected farmland values to decrease in the October through December period of 2018 and just 2 percent expected farmland values to increase.

Also, more respondents anticipated weaker rather than stronger demand by farmers and non-farm investors to acquire farmland this fall and winter compared with a year earlier. Still, on the whole, respondents expected an up-tick in transfers of available properties for sale.

Twenty-six percent of the responding bankers forecasted an increase in the volume of farmland transfers relative to the fall and winter of a year ago, and 21 percent forecasted a decrease.

For the sixth year in a row, crop net cash earnings were expected to contract over the fall and winter from their levels of a year earlier based on the predictions of survey respondents. Only 5 percent of survey respondents anticipated crop net cash earnings to rise over the next three to six months relative to a year ago, while 82 percent anticipated these earnings to fall.

According to the responding bankers, hog, cattle, and dairy farmers were yet again expected to encounter diminished net cash earnings over the fall and winter relative to a year ago.

“An Iowa respondent emphasized the ‘concern from row crop farmers regarding interest rate increases next year and low commodity prices.’ This concern was echoed by livestock operators. So, there was a decidedly downcast outlook for agriculture based on the latest survey responses,” Oppedahl said.

Tom C. Doran can be reached at 815-780-7894 or Follow him on Twitter at: @AgNews_Doran.


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