For 2018, annual farmland values in the Seventh Federal Reserve District were steady overall. Yet, values for “good” agricultural land in the fourth quarter of 2018 were up 1% from the third quarter, according to a survey of agricultural bankers across the District. Although 75% of the responding agricultural bankers say they expect farmland values to be stable during the January through March period of 2019, nearly all of the rest expected farmland values to move down, the Federal Reserve Bank of Chicago reports.
The bank notes the district’s agricultural land values in the fourth quarter of 2018 were largely the same as a year ago. For the fourth quarter of 2018, there were no year-over-year changes in agricultural land values in Illinois, Indiana, and Wisconsin; Iowa’s farmland values moved down from a year earlier, while Michigan’s apparently moved up (too few Michigan bankers responded to report a numerical change in farmland values). The district’s farmland values were up 1% in the fourth quarter of 2018 relative to the third quarter. Illinois’s and Indiana’s agricultural land values rose in the fourth quarter of 2018 from the third quarter, but Wisconsin’s fell and Iowa’s were unchanged.
After accounting for inflation, the district actually experienced a yearly decrease of 2% in farmland values for 2018. This was the fifth straight annual real decline in district farmland values—the longest downturn since the 1980s. The district’s farmland values fell 13% percent in real terms from their peak in 2013 to the end of 2018. But the decrease in agricultural land values over this span was just 6%in nominal terms
Deteriorating agricultural credit conditions continued to affect the District in the fourth quarter of 2018. Repayment rates on non-real-estate farm loans decreased in the October through December period of 2018 relative to the same period of 2017, and rates of loan renewals and extensions increased. Even so, about the same percentage (2.4%) of current agricultural borrowers were not likely to qualify for operating credit at the survey respondents’ banks in 2019 as in 2018. Non-real-estate loan demand in the fourth quarter of 2018 climbed from the previous year’s level, while funds available for lending were slightly lower than a year ago. The average loan-to-deposit ratio for the District (79%) was higher than a year earlier. Average interest rates on farm operating loans and farm real estate loans had moved up by the end of 2018 to levels not seen since 2010 and 2011, respectively.