Tag Archives: farmland-values
Farmland Values Notch Another Dramatic Rise
John Luke, The Times The Wietbrock family works to harvest corn last fall on their land near Lowell. Statewide farmland values have risen by as much as 19.1 percent over the last year, according to a recent Purdue University study. September 12, 2013 4:00 am • Joseph S. Pete joseph.pete@nwi.com, (219) 933-3316 Farmland values and cash rents have risen again this year, and Northwest Indiana has some of the highest prices in the state, according to a Purdue University study. Corn and soybean prices have recently started to wilt but had reached record highs after last year’s drought, causing farm incomes to shoot up. Higher prices drove up profits, and farmers also got insurance reimbursements for lost crops. The better-than-expected farm incomes, low interest rates and strong demand have helped push agricultural land values up by as much as 19.1 percent this year, compared to last year, the Purdue study found. Cash rents rose by 9.4 to 10.9 percent over the same period. “While the 2012 Indiana crop suffered from the worst drought since 1988, the increase in farmland values did not bother to slow down,” said Craig Dobbins, a Purdue Extension agricultural economist. The average price of an acre of top-quality farmland in Northern Indiana rose by 17.3 percent to $9,336 an acre in June, compared to $7,958 last June. Average and poor quality farmland increased by about 14 percent over the same period. The recent dip in corn and soybean prices may slow or stop the growth in land prices, and even cause slight declines in some areas. But the cost of farmland has been booming in recent years. Five years ago, a good tillable acre of Northwest Indiana farmland would have fetched around $5,000, said Gene Eldridge, a Porter County Realtor, who represents various types of real estate, including farmland. Today, the price has risen to an average of more than $9,300 per acre in the Northern part of the state, according to Purdue. “Crop prices are up, and the margins are there,” Eldridge said. “That drives up the price of the land, and what farmers are paying in cash rent.” Prices, however, may have peaked for now, unless corn prices hit a new plateau, said Craig Blume, regional vice president of Farm Credit Mid-America. Strong demand, bad weather and farmers who were willing to pay a premium for adjoining parcels drove up prices for the last few years. But lending caps have started to reach their upper limits, to the point where farmers would have to rely on income from land they already own free and clear to pay off purchases of more farmland, Blume said. “It’s stabilized,” he said. “It’s reached where it’s going to go for now.” Commercial development, which had been largely dormant during the downturn, accounted for part of the demand for land. “The transitional land market – that is, farmland moving out of agriculture – seems to have sprung back to life,” Dobins said. “This is a specialized market, with transitional land value strongly influenced by the planned use and location.” Cash rents grew to $310 an acre from $277 an acre last year for top-quality farmland in Northern Indiana, which is a gain of 11.9 percent. Rent prices grew more modestly for average and lower quality farmland, increasing by 7.1 to 8.1 percent over the last year. Researchers came up with the estimates after surveying more than 260 land appraisers, agricultural loan officers, farm managers, farmers and Farm Service Agency personnel. Continue reading
Farmland Values and Credit Conditions
AUGUST 21, 2013 By: News Release CHICAGO–Acording to the latest AgLetter published by the Federal Reserve Bank of Chicago, for the second quarter of 2013, “good” farmland values were up 17 percent from a year ago in the Seventh Federal Reserve District, which consists of Illinois, Indiana, Iowa, Michigan and Wisconsin. However, agricultural land values registered no gain in the second quarter relative to the first quarter of 2013, according to a survey of 211 agricultural bankers. The last time there was no quarterly increase in agricultural land values was in 2009. Generally, the stellar year-over-year gains in farmland values across the five District states masked the comparative weakness of the quarterly results. Moreover, the percentage of survey respondents anticipating farmland values to fall during the third quarter of 2013 was the same as the percentage predicting them to rise (7 percent); 86 percent of responding bankers expected farmland values to be stable. The District’s agricultural credit conditions were generally better in the second quarter of 2013 than a year earlier. The availability of funds for lending by agricultural banks was up relative to a year ago; the banks’ deposits were enhanced not only by high crop prices but also by payments for insured losses due to last year’s drought. Repayment rates for non-real-estate farm loans were higher than a year ago, with 94 percent of the respondents’ agricultural loan portfolio having no significant repayment problems. Renewals and extensions of non-real-estate farm loans declined from the level of a year earlier. The responding bankers perceived that non-real-estate loan demand for the April through June period of 2013 was below that for the same period last year. For the second quarter of 2013, the District’s average loan-to-deposit ratio edged up to 64.6 percent—12.6 percentage points below the average level desired by survey respondents. Finally, interest rates on farm loans rose for the first time since early 2011. Looking forward Crop producers will face tighter cash flows as their revenues decline (especially if crop prices slide further). Yet, the responding bankers did not expect agricultural loan volumes to rise for the July through September period of 2013 relative to the same period last year. In fact, some categories, including operating loans and livestock loans, were anticipated to shrink in the third quarter of 2013 relative to their levels in the same quarter of 2012, according to the survey respondents. Falling crop prices should bring relief to livestock producers, whose profits have suffered on account of the high feed costs in recent years. Continue reading
Brakes Being Applied To Rapid Rise In Farmland Values?
August 28, 2013 8:30 am • By Jane Fyksen Crops Editor Is the party coming to an end? That is the question raised by the Federal Reserve Bank of Chicago’s August farmland values and credit conditions report. Even though for second-quarter 2013, “good” farmland was up 17 percent from a year ago in the Seventh District, which includes three-fourths of Wisconsin, ag land values registered no gain in the second quarter relative to the first quarter this year, according to 211 ag bankers in the district. “The last time there was no quarterly increase in agricultural land values was in 2009,” says David Oppedahl, business economist with the Chicago Reserve. “Generally, the stellar year-over-year gains in farmland values across the five district states masked the comparative weakness of the quarterly results.” Further, Oppedahl reports that the percentage of ag bankers in this quarterly survey anticipating farmland values to fall during the present third quarter (July-September) is the same as those predicting land value to rise (both 7 percent). Eighty-six percent think farmland values will be stable in the third quarter. As noted, the Seventh District’s survey of ag bankers includes three-quarters of the state, generally all but the northwest section. From July 1, 2012, to July 1, 2013, they saw land values in Wisconsin up 7 percent, 6 percent in the more southeasterly counties, 11 percent in the more central portion of the state and 16 percent in the southwest, which is generally included with northeast Iowa in the survey; however, in the second quarter (April 1 to July 1, 2013), ag bankers say the value of “good” farmland in Wisconsin only rose 1 percent. That is based on a 6 percent rise across the state’s midsection, but a 3 percent drop in southeastern and eastern counties up along Lake Michigan. Southwestern counties, lumped in with northeast Iowa, saw a 2 percent second-quarter hike. Year-to-year changes and second-quarter 2013 changes, respectively, for other district states are as follows Illinois (the northern two-thirds), up 17 percent, down 1 percent; Indiana (up 21 percent, up 5 percent); Iowa, up 18 percent, unchanged in recent months; and Michigan, up 18 percent, down 7 percent. Oppedahl highlights the second-quarter pause in what is been a rapid rise in farmland values in recent years, and he points to the quarterly decreases in ag land values in Illinois and Michigan. While farmland values on a year-over-year basis “still appear to be soaring,” he notes that “changes in farmland values on a quarterly basis may be presaging shifts in the year-over-year pattern in the latter half of 2013.” The year-over-year increase in farmland values for the second quarter was larger than that for the previous one – 17 percent versus 15 percent reported in June. Ag bankers, like producers, are seeing key crop prices starting to slide, and wondering if land values With larger harvests anticipated this fall to bolster crop supplies, USDA estimates price intervals for the 2013-2014 crop-year of $4.50 to $5.30 a bushel for corn and $10.35 to $12.35 for soybeans. “Given these price ranges, the district’s 2013 corn and soybean harvests would be lower in value compared with its 2012 harvests,” notes Oppedahl. While some of the lost revenue will be recouped via crop insurance payments for prevented plantings and revenue protection policies, this Federal Reserve economist cautions that “the anticipation of lower crop revenues – especially combined with potentially rising interest rates on farm loans – portended softness in future farmland values.” As for credit conditions in the district, he reports they were generally better in the second quarter than a year earlier. Ag bankers had more funds for lending, and repayments rates for non-real-estate farm loans were higher than a year ago. Ninety-four percent of responding bankers said their ag loan portfolios were having no significant repayment problems during April, May and June, and they perceived non-real-estate loan demand for the period to be below what it was during the same three months last year. Interest rates on farm loans rose in the second quarter for the first time since early 2011. That followed record-low rates in the previous quarter. As of July 1, district averages for interest rates on new farm operating loans and real estate loans were 4.94 percent and 4.65 percent, respectively, both lower than a year ago. “The uptick in interest rates on farm loans may mark an important shift in the district’s agricultural credit conditions,” Oppedahl warns. “Demand for non-real-estate loans relative to a year ago fell during the second quarter of 2013, but not as sharply as it did during the first quarter,” says Oppedahl. “With 17 percent of survey respondents reporting higher demand for non-real-estate loans compared with a year ago, and 30 percent reporting lower, the index of loan demand was 97 for the second quarter of 2013 – higher than its reading of 67 for the first quarter. Moreover, in the first six months of 2013, the amount of farm operating loans generated by banks was lower-than-typical, whereas the amount of farm mortgages was higher than typical.” Given such low demand for non-real-estate farm loans, it’s “not surprising,” he notes, that the district’s average loan-to-deposit ratio remained quite low at 64.5 percent – “well below the ratio desired by responding bankers (77.2 percent).” Bankers anticipate operating loans and livestock loans to shrink in this third quarter, relative to July-September last year; however, falling crop prices should bring some relief to livestock producers, who have suffered in recent years with high feed prices, Oppedahl says. Continue reading
