Year-over-year farmland values flat

CHICAGO — Farmland values in the Midwest were flat in the second quarter of 2026 compared to a year ago, according to a Seventh Federal Reserve District report.

Details of the latest update were featured in the Federal Reserve Bank of Chicago’s AgLetter that looked at farmland values in the northern two-thirds of Illinois and Indiana, all of Iowa, the southern two-thirds of Wisconsin and Michigan’s Lower Peninsula.

“Farmland values in the Seventh District were flat in the second quarter of 2026 from a year earlier, their slowest year-over-year growth since the fourth quarter of 2024,” the report said.

Values for “good” agricultural land also showed no change in the second quarter of 2026 relative to the first quarter, according to survey responses from 79 district agricultural lenders.

Illinois and Iowa farmland values experienced year-over-year increases of 1% and 4%, respectively, while Indiana and Wisconsin farmland values experienced year-over-year decreases of 3% and 2%, respectively.

In real terms — after being adjusted for inflation with the Personal Consumption Expenditures Price Index, or PCEPI — there was a year-over-year decrease of 3.7% in Seventh District agricultural land values.

This was the largest year-over-year decline in real farmland values for the district since the third quarter of 2016.

“Several lenders commented that investment activity for data centers and solar and wind farms helped hold up agricultural land values,” the report said.

Credit Conditions

Agricultural credit conditions for the Seventh District were weaker in the second quarter of 2026 compared with a year ago.

An Iowa respondent said: “Commodity price volatility and elevated production expenses are the factors weighing most heavily on credit conditions.”

The share of farm loans with “major” or “severe” repayment problems in the district’s agricultural bank loan portfolio, as measured in the second quarter of every year, was 3.7% in 2026 — up from last year’s level of 2.9% and the highest reading since 2020.

“Furthermore, the share of farm loans with ‘no’ repayment problems declined to 88.5% from 90.1% a year earlier. In addition, repayment rates for non-real-estate farm loans were lower in the second quarter of 2026 compared with a year ago, and renewals and extensions of such loans were higher,” according to the AgLetter.

The district’s average loan-to-deposit ratio rose to 80.7% in the second quarter of 2026 — the highest reading since collection of these data began in the 1970s, yet still over 3% below the average level desired by the responding bankers.

“Even so, 63% of responding bankers said that deposits at their banks had risen over the past year, whereas 19% said that they had fallen,” the report said.

Over the first half of 2026, district banks made more farm operating loans and farm mortgages than normal, according to responding lenders.

Over the same time period, lenders reported that Farm Credit System institutions, as well as merchants, dealers and other input suppliers, lent more funds to the agricultural sector than normal, while life insurance companies lent less.

The amount of collateral required by lenders across the district was higher than a year ago.

Average nominal interest rates on farm operating at 7.12%, feeder cattle at 7.14% and farm real estate loans at 6.79% were up a little during the second quarter of 2026 from the first quarter.

In real terms, after being adjusted for inflation with the PCEPI, the average interest rates on operating loans, loans for feeder cattle and loans for farm real estate were down from the first quarter of 2026 — the fourth consecutive quarter with declines for all three.

Looking Ahead

Looking forward to the third quarter of 2026, survey respondents expected higher volumes for non-real-estate agricultural loans — primarily for operating loans, feeder cattle loans and loans guaranteed by the Farm Service Agency — compared with year-earlier levels.

Farm machinery, grain storage construction and farm real estate loan volumes were expected to shrink below the levels seen in the third quarter of 2025.

Only 5% of the responding lenders anticipated farmland values to rise in the third quarter of 2026, while 81% anticipated them to be stable and 14% anticipated them to fall.

A large share of survey respondents, at 43%, perceived district agricultural land to be overvalued, though 57% of them viewed farmland as appropriately valued. Not a single respondent reported it as undervalued.

“At some point farmland values should plateau as outside pressure from solar and data centers subsides,” according to a Wisconsin lender.

The report was authored by Elizabeth Kepner, economic research department business economist, and David Oppedahl, regional research and engagement team policy adviser.