Tag Archives: kansas-city
UPDATE: Farmland Values In Midwest, Plains Rise in Second Quarter -Fed Banks
(Adds quote from Fed economist in the eighth paragraph, other details throughout.) August 15, 2013, WSJ By Mark Peters The farm economy showed signs of slowing in parts of the U.S. during the second quarter, even as agricultural-land values continued to climb, according to new Federal Reserve reports. Regional bankers in a quarterly survey by the Kansas City Federal Reserve Bank said farm incomes fell in the second quarter and declines are expected in the third quarter, too, amid sharp declines in the prices of crops such as corn and soybeans from record highs a year ago. Some farmers also are struggling with lingering drought in Kansas and Nebraska. A separate survey by the St. Louis Federal Reserve Bank found bankers expect a pullback in farm incomes in the third quarter after a modest increase in the second quarter. Farmland prices, which have risen rapidly in recent years amid historically high crop prices, continued to increase in the latest three-month period. But some signs of the market cooling are appearing. The Kansas City Fed reported that non-irrigated cropland values rose 1.8% over the prior quarter on a non-seasonally adjusted basis, showing a further slowing of gains. Still, land values were up 18% from a year ago for non-irrigated land and 25% for irrigated cropland. The St. Louis Fed, meanwhile, saw farmland prices rise 11% in the second quarter to $5,672 an acre, and bankers expect additional gains in the third quarter relative to last year. That followed a 2.3% decline in the first quarter in the region, which includes parts of the Midwest and Southeast. In the Kansas City survey, an increasing number of bankers in the region, which stretches from Missouri to Colorado, said they think farmland values have peaked. But a majority of those expecting declines see a drop of less than 10% over the next year. They also see a limited correlation currently between farmland prices and farm incomes, with low interest rates, overall wealth in the farm sector, and limited alterative investment opportunities playing a larger role. Farm incomes have climbed to levels not seen since the early 1970s when adjusted for inflation, so a lag is likely to occur between falling incomes and their effect on farmland prices. “It may take some time before low incomes translate into relatively lower wealth that would represent a drag on land-value gains,” said Nathan Kauffman, an economist with the Kansas City Fed. U.S. cropland values have surged in the past four years, with federal data released earlier this month showing a nearly 80% gain in the Midwest and a 125% jump in the Great Plains over that period. Driving the rise in land prices and incomes has been historically high corn and soybean prices, but expectations for a record corn crop and a near-record soybean crop this autumn have caused prices to plummet this year. U.S. corn futures are trading more than 40% below the record settlement price of $8.3125 a bushel last August. Bankers in the Kansas City survey reported a pickup in operating loan demand in the face of rising input costs, but loans for farm machinery and other equipment may fall. Mr. Kauffman said debt levels on average aren’t raising concerns, but groups such as young farmers and those who expanded rapidly during the recent boom have considerably higher leverage. Write to Mark Peters at mark.peters@wsj.com Continue reading
Farm Belt’s Boom Shows Signs of Slowing
The Wall Street Journal Menu By Mark Peters The rise in prices for agricultural land slowed somewhat to start the year in parts of the U.S. Farm Belt, new reports showed, signaling a boom in land values might be moderating as commodity prices cool and incomes for farmers are expected to weaken. The Kansas City Federal Reserve Bank said in a report Wednesday that prices for nonirrigated farmland in its region rose 3.4% in the first quarter from the fourth quarter of 2012. That was much slower than the 7.7% quarter-to-quarter increase recorded for the same region a year earlier. A separate report from the St. Louis Federal Reserve Bank also released Wednesday showed that land values in parts of the Midwest and Southeast regions fell by an average of 2.3% in the first quarter compared with the previous quarter. Analysts cautioned against making too much of a single quarter. And even with those slower rates, values for nonirrigated farmland in the Kansas City district, which stretches from western Missouri to Wyoming, have soared a total of 19.3% over the past year to record levels, the bank said. More information will come on Thursday in a report expected from the Federal Reserve Bank of Chicago, whose region includes several of the biggest corn-growing states in the upper Midwest. Economists have been watching farmland values closely, with some voicing concern about a possible bubble, as farmers have plowed the money from a record run-up in commodity prices back into the land. A low interest-rate environment has exacerbated the situation, making the rising farmland more attractive for farmers seeking better returns on their money. But signs of a slowdown are emerging. The benchmark corn contract has fallen more than 20% from records set last summer as federal forecasters predict a record corn crop this autumn. Farmers’ costs also are increasing, especially for key goods such as seed and fertilizer, the Kansas City Fed said. On Wednesday, tractor maker Deere & Co. forecast net cash income for U.S. farmers will fall 9.5% to $122.7 billion in 2013. But executives added that farmers should be able to withstand lower incomes because debt levels aren’t rising, even after big investments in land and equipment in recent years. “You see in the U.S. very strong farmer balance sheets, despite what’s been happening with land prices,” said Deputy Financial Officer Marie Ziegler. Nathan Kauffman, an economist with Kansas City Fed, said it will take a few quarters to determine whether the first quarter’s “modest” slowdown marks a fundamental shift in the farmland market or a short-term ebb. Bill Davis, chief credit officer at Farm Credit Services of America, said the agricultural lender saw a flurry of sales at the end of 2012 as farmers sold land ahead of tax increases that took effect this year. And while sales continue in farm states such as Iowa and Nebraska, the surge in prices hasn’t. “We have seen things level off in the first quarter,” he said. Bankers surveyed by for the Kansas City Fed’s latest report said debt levels for farmers generally remain manageable. But they noted that young farmers and those who are expanding operations face rising debt levels. The Fed bank has warned that farmers historically have increasingly turned to debt to continue capital investments even as incomes decline, which can magnify problems in a downturn. –Bob Tita contributed to this article. Continue reading
Prices for Farmland Show Moderation
By MARK PETERS The rise in prices for agricultural land slowed somewhat to start the year in parts of the U.S. Farm Belt, new reports showed, signaling a boom in land values might be moderating as commodity prices cool and incomes for farmers are expected to weaken. The Kansas City Federal Reserve Bank said in a report Wednesday that prices for nonirrigated farmland in its region rose 3.4% in the first quarter from the fourth quarter of 2012. That was much slower than the 7.7% quarter-to-quarter increase recorded for the same region a year earlier. A separate report from the St. Louis Federal Reserve Bank also released Wednesday showed that land values in parts of the Midwest and Southeast regions fell by an average of 2.3% in the first quarter compared with the previous quarter. Analysts cautioned against making too much of a single quarter. And even with those slower rates, values for nonirrigated farmland in the Kansas City district, which stretches from western Missouri to Wyoming, have soared a total of 19.3% over the past year to record levels, the bank said. More information will come on Thursday in a report expected from the Federal Reserve Bank of Chicago, whose region includes several of the biggest corn-growing states in the upper Midwest. Economists have been watching farmland values closely, with some voicing concern about a possible bubble, as farmers have plowed the money from a record run-up in commodity prices back into the land. A low interest-rate environment has exacerbated the situation, making the rising farmland more attractive for farmers seeking better returns on their money. But signs of a slowdown are emerging. The benchmark corn contract has fallen more than 20% from records set last summer as federal forecasters predict a record corn crop this autumn. Farmers’ costs also are increasing, especially for key goods such as seed and fertilizer, the Kansas City Fed said. On Wednesday, tractor maker Deere DE -4.40% & Co. forecast net cash income for U.S. farmers will fall 9.5% to $122.7 billion in 2013. But executives added that farmers should be able to withstand lower incomes because debt levels aren’t rising, even after big investments in land and equipment in recent years. “You see in the U.S. very strong farmer balance sheets, despite what’s been happening with land prices,” said Deputy Financial Officer Marie Ziegler. Nathan Kauffman, an economist with Kansas City Fed, said it will take a few quarters to determine whether the first quarter’s “modest” slowdown marks a fundamental shift in the farmland market or a short-term ebb. Bill Davis, chief credit officer at Farm Credit Services of America, said the agricultural lender saw a flurry of sales at the end of 2012 as farmers sold land ahead of tax increases that took effect this year. And while sales continue in farm states such as Iowa and Nebraska, the surge in prices hasn’t. “We have seen things level off in the first quarter,” he said. Bankers surveyed by for the Kansas City Fed’s latest report said debt levels for farmers generally remain manageable. But they noted that young farmers and those who are expanding operations face rising debt levels. The Fed bank has warned that farmers historically have increasingly turned to debt to continue capital investments even as incomes decline, which can magnify problems in a downturn. —Bob Tita contributed to this article. Write to Mark Peters at mark.peters@dowjones.com A version of this article appeared May 15, 2013, on page A2 in the U.S. edition of The Wall Street Journal, with the headline: Prices for Farmland Show Moderation. Continue reading
