Modest increase in Midwest farmland values

CHICAGO — Farmland values were unchanged from the second to third quarter of 2025 in the Seventh Federal Reserve District and up 3% year-over-year.

The information, published in the Federal Reserve Bank of Chicago’s agricultural newsletter Nov. 13, is based on responses from 102 district agricultural bankers who competed the survey.

The Seventh District includes the northern two-thirds of Illinois and Indiana, all of Iowa, the southern two-thirds of Wisconsin and Michigan’s Lower Peninsula.

Illinois, Indiana and Wisconsin had year-over-year increases in farmland values by 4%, 6% and 4%, respectively, while Iowa was the only district state reporting a year-over-year decrease — 1%.

A 2% quarterly increase in Illinois “good” farmland values was offset by a quarterly decrease of 7% in Wisconsin farmland values in the third quarter of 2025. Indiana and Iowa agricultural land values saw no changes from the second quarter of 2025.

The quarterly report, authored by David Oppedahl, policy adviser, and Elizabeth Kepner, business economist, also summarized survey findings related to current credit conditions and future expectations.

Credit Conditions

Agricultural credit conditions for the Seventh District softened further in the third quarter of 2025. For the July through September period of 2025, repayment rates for non-real-estate farm loans were lower than a year earlier for the eighth quarter in a row.

In addition, renewals and extensions of non-real-estate agricultural loans were higher than a year earlier for the ninth straight quarter. The district still saw stronger demand for non-real-estate farm loans in the third quarter of 2025 relative to a year ago; this was the eighth consecutive quarter of stronger demand.

The availability of funds for lending by agricultural banks was lower than a year ago for the tenth quarter in a row.

“Collateral requirements for farm loans in the third quarter of 2025 rose from the same quarter of last year; 21% of the survey respondents reported that their banks required more collateral, while none reported that their banks required less,” the report stated.

“The Seventh District’s average loan-to-deposit ratio declined to 76.9% in the third quarter of 2025. The gap between the average loan-to-deposit ratio and the average level desired by the responding bankers narrowed from a year ago to around 4%, with half of the survey respondents stating that their respective banks were below their targeted levels.”

Agricultural interest rates fell slightly during the third quarter of this year.

As of Oct. 1, the district’s average nominal interest rates on new operating loans, at 7.47%, feeder cattle loans, at 7.57%, and farm real estate loans, at 6.82%, were at their lowest levels since the end of 2022.

Looking Forward

For the final quarter of 2025, 29% of survey respondents expected Seventh District agricultural land values to decline, 8% expected them to rise and 63% expected them to be stable.

In line with these survey results, softer demand by agricultural producers for farmland will likely extend into 2026.

According to the survey, 44% of respondents expected farmers to have weaker demand to acquire farmland this fall and winter compared with a year earlier, while 10% expected stronger demand.

In contrast, 28% of survey respondents anticipated non-farm investors to have stronger demand to purchase farmland over the same period, though 20% anticipated weaker demand from this market segment.

Responding bankers narrowly projected an increase in the volume of agricultural land transfers during this fall and winter relative to a year ago.

An Illinois banker suggested that 2025 losses could lead to “liquidation of farmland to inject additional working capital into farming operations.”

Earnings Outlook

Net cash earnings, which include government payments for crop farmers, were expected to be lower over the next three to six months than their levels of a year ago. Just 3% of survey respondents forecasted them to be higher, while 92% forecasted them to be lower.

Similarly, only 2% of survey respondents expected net cash earnings for dairy farmers to increase over the next three to six months relative to a year earlier, while 25% expected them to decrease.

By contrast, 71% of responding bankers forecasted net cash earnings for cattle and hog farmers to increase over the next three to six months relative to a year ago, while 9% forecasted them to decrease.

Half the survey respondents anticipated a lower volume of farm loan repayments over the next three to six months relative to a year earlier. Just 1% predicted a higher volume.

“Unsurprisingly, given the lower crop and dairy farm income expectations, forced sales or liquidations of farm assets owned by financially distressed farmers were expected to rise in the next three to six months relative to a year ago; 47% of the responding bankers projected them to increase, while only 3% projected them to decrease,” the report noted.

“Non-real-estate loan volumes were forecasted to be larger in the last three months of 2025 compared with the same three months of 2024. Farm real estate loan volumes were forecasted to be smaller in the final three months of 2025 compared with the same three months of a year earlier.”