Jesse Newman reported yesterday at The Wall Street Journal Online that, “The value of farmland fell across much of the Midwest in the third quarter, Federal Reserve reports showed Thursday, as crop prices depressed by a record harvest pressured farmers’ profits.
“The declines illustrate continued Farm Belt strain as low commodity prices weigh on growers’ incomes and appetite for new ground. Midwestern growers are wrapping up what is projected to be a historic harvest. Corn and soybean crops are forecast to smash records thanks to favorable weather across much of the Farm Belt earlier this year. The huge hauls add to bulging U.S. and world stockpiles fanning a global commodity glut spanning several years.
“As a result, the average price of good-quality farmland in the Federal Reserve Bank of Chicago’s district, which includes major farming states such as Illinois and Iowa, fell 3% from a year ago as financial conditions deteriorated. It was the fourth consecutive quarter of annual declines in cropland values there, the longest downturn since the late 1980s.”
Graph From The Federal Reserve Bank of Chicago
Ms. Newman indicated that, “In the Kansas City Fed’s district, which includes Kansas and Nebraska, the value of irrigated farmland slid 7% versus a year earlier. The value of nonirrigated land dropped 6.1%. That is the steepest annual slide since the mid-1980s. Cropland values in Kansas saw the sharpest decline.
“The average price of ‘quality’ farmland held steady from year-ago levels in the St. Louis Fed’s district, which includes parts of Indiana and Illinois. Bankers across all three Fed districts anticipate prices will drop in the current quarter as incomes deteriorate further.”
The Journal article added that, “Bankers surveyed by the Kansas City and Chicago Fed banks said pressure is building on U.S. farmers, with demand for loans to operate farms rising in the two districts while farmers’ repayment rates fall. In the Kansas City region, that has prompted growth in agricultural bankers’ lists of loans to watch. Lenders are requiring more collateral to secure farm loans while raising interest rates. Still, defaults on farm loans remain low overall, the Fed said.
“Meanwhile, 3% of lenders in the St. Louis Fed district expect borrowers will be forced to shrink farm operations or get out of the business entirely.”
