Tag Archives: survey
Farmland Values Continue Rising
Published: Friday, June 28, 2013 On the whole, “good” farmland values kept rising in the Seventh Federal Reserve District during the first quarter of 2013, but signs of moderation in farmland value gains emerged. Agricultural land values appreciated 4 percent in the first quarter of 2013 relative to the fourth quarter of 2012, based on the survey responses of 219 district agricultural bankers. This quarterly increase was smaller than that of the previous survey. That said, the year-over-year increase in agricultural land values was 15 percent in the first quarter of 2013, nearly matching the annual gain of 2012. Both the district’s quarterly and year-over-year increases in farmland values masked the weaker results of some areas, such as Wisconsin. Demand to purchase agricultural land increased in the three- to six-month period ending with March 2013 compared with the same period a year ago. Similarly, the number of farms sold, the amount of acreage sold, and the amount of farmland for sale rose during the winter and early spring of 2013 compared with a year ago. Additionally, farmland cash rental rates in the district were 11 percent higher in 2013 compared with 2012. With regard to agricultural land values during the second quarter of 2013, over three-quarters of the responding bankers expected them to be stable. Credit conditions continued to improve for agricultural producers. Both the index of availability of funds to lend and the index of repayment rates for non-real-estate farm loans moved up, although they did not reach their peaks. In addition, fewer renewals and extensions of these loans indicated improvement in credit conditions. Yet, the index of demand for non-real-estate loans in the first quarter of 2013 fell to its lowest level since 1986. At 63.7 percent, the average loan-to-deposit ratio had not been lower since 1994. Interest rates on farm loans moved down further to new lows for the survey. Farmland Values District agricultural land values rose 4 percent in the first quarter of 2013 relative to the fourth quarter of 2012, easing down from the quarterly increase of last year’s final quarter. However, the year-over-year increase in district farmland values was 15 percent in the first quarter of 2013, almost matching the annual gain of 2012. Furthermore, the district’s quarterly and year-over-year gains in agricultural land values masked the weaker results of some areas (see table). Most notable was a 3 percent drop in Wisconsin’s farmland values in the first quarter of 2013 from a year ago. That said, the year-over-year and quarterly gains in agricultural land values for Michigan were higher than the strong gains of the previous quarter. For Illinois and Iowa, the increases in farmland values on a year-over-year basis were close to those of the previous quarter, although these district states’ quarterly increases were softer than those of the last quarter. There was higher demand to purchase farmland in the three- to six-month period ending with March 2013 compared with the same period a year ago; 59 percent of the survey respondents observed higher demand to purchase farmland, while only 1 percent observed lower demand. The supply of farmland was higher too: There was an increase in the amount of farmland for sale over the winter and early spring relative to a year ago, as 37 percent of the responding bankers reported more farmland was up for sale in their areas and 28 percent reported less. Similarly, the number of farms and amounts of acreage sold increased over the winter and early spring relative to a year ago. A little over one-third of survey participants reported that farmers increased their share of farmland acres purchased (relative to investors) in the three- to six-month period ending in March 2013 versus the same period a year earlier; 3 percent said farmers decreased their share; and 62 percent saw no change. District cash rental rates for agricultural land in 2013 were up 11 percent from 2012 (this annual increase was smaller than those of the past two years). Over the same period, farmland cash rental rates were up 9 percent in Illinois, 11 percent in Indiana, 13 percent in Iowa, 2 percent in Michigan and 12 percent in Wisconsin. District cash rental rates increased almost 10 percent from 2012 when adjusted for inflation using the Personal Consumption Expenditures Price Index; this result was the fourth-largest increase in farmland cash rental rates in the history of the survey. The string of strong advances in farmland cash rental rates propelled their inflation-adjusted index past its previous peak. Similarly, the index of agricultural land values has established new records every year since 2011. Historically, changes in cash rental rates have tended to trail those in farmland values, so not surprisingly, the equity derived from the land outpaced the income from cash rents in 2013. Rising cash rental rates and farmland values reflected higher crop prices. Prices in the first quarter of 2013 averaged $7.06 per bushel for corn and $14.47 per bushel for soybeans, according to the U.S. Department of Agriculture. In the first quarter of 2013, corn prices and soybean prices increased 2.5 percent and 1.4 percent, respectively, from the fourth quarter of 2012; corn prices grew 13 percent and soybean prices grew 17 percent compared with a year ago, as tight stocks and uncertainty about the weather boosted prices. Moreover, at the end of the first quarter of 2013, $16.1 billion had been paid out for insured 2012 agricultural losses across the U.S., of which $6.66 billion went to producers in the five district states (41 percent of the U.S. total). These factors bolstered farmland values and cash rents while enhancing agricultural credit conditions in the first quarter of 2013. Credit Conditions Agricultural credit conditions improved in the first quarter of 2013 compared with the first quarter of 2012. At 161, the index of funds availability nearly matched last year’s record, with 61 percent of the survey respondents reporting their banks had more funds available to lend and under 1 percent reporting their banks had less. The index of repayment rates for non-real-estate farm loans moved up to 143 for the first quarter of 2013—its highest value since setting a new high a year ago; 47 percent of the responding bankers reported higher rates of repayment and 4 percent reported lower rates. Thirty-five percent of the survey respondents observed fewer loan renewals and extensions over the January through March period of 2013 compared with the same period last year, while 5 percent observed more of them. Continue reading
Iowa Farms Worth Double Since 2008
Biannual survey shows crop land values continue to rise May 5, 2013 Farmland property values have risen 17 percent in the past year, according to the Iowa Chapter of Realtors Land Institute survey. The survey estimates the value of bare, unimproved land through a survey of land institute members, financial institutions that approve agricultural lending and rural appraisers. Kyle Hansen, president of the Iowa chapter of the Realtors Land Institute, said per-acre values for tillable cropland have more than doubled since March 2008, increasing from $4276 and acre to $8,691 an acre on average. Prices in northwest region are growing, hitting $13,387 per tillable acre. Article Photos AP PHOTO A survey released at the end of March shows that cropland, like the land shown here in the file photo, has increased in value over the past six months, more than doubling since 2008. The central Iowa region exceeded the state average for per-acre value in high, medium and low-quality cropland. “They have seen a larger increase because of ethanol and direct competition in that area,” Hasen said. The land institute also requested pasture and timberland values as supplemental information. Every six months, the institute conducts the survey and gives a percent increase from the previous six months. Central Iowa’s land values increased 8.5 percent in the past six months, according to the survey released at the end of March. Central Iowa’s increase was just below the 9.4 percent increase statewide, but the report shows that each of the nine districts showed an increase. Over the past few years, however, Hansen said the areas that see the largest increase vary between surveys, meaning that no region of the state is growing at a faster rate than the others. Mike Duffy, an economist at Iowa State University who helps conduct the state land value survey, said farmland values are high in both nominal and inflation-adjusted terms. The primary reason is the success farming has seen since the 2006 Energy Policy Act, which mandated the use of ethanol in gasoline. That mandate resulted in farmers having more money to spend, and farmers typically invest their money in accumulating more land, Duffy said. The success of ethanol will depend largely on the price of oil. Concerns over a collapse in land values, should the government cease subsidizing ethanol, will only prove valid if producing ethanol proves more costly than producing oil in the free market. Growth in India and China also contributes to a rise in the sale of corn to feed animals, Duffy said. “As their incomes improve, their diets improve,” he said. “More money means more meat. More meat means more sales.” A downside to the increase in land value, Duffy said, is that it makes carving out a niche more difficult for upstart farmers because established farmers are buying all the available land, making land more expensive because of its increased scarcity. According to the survey, central Iowa exceeded the state average in per-acre value of high, medium and low-quality cropland. The region fell just shy of meeting the state average for nontillable pasture and timber per acre. Continue reading
