Nonirrigated cropland and ranchland values increased 2.5% through the end of June versus a year earlier, reports the Federal Reserve Bank of Kansas City. The bank’s quarterly survey of agricultural bankers found the value of irrigated cropland remained stable through the end of the second quarter compared to a year ago. The bank serves Kansas, western Missouri, Nebraska, Oklahoma and Mountain States of Colorado, northern New Mexico and Wyoming.
Looking ahead, the bank notes it survey found more bankers expect farmland values to decline in coming months. “In fact, expectations for all types of farmland values declined at a faster pace than in previous years. Although most bankers expect no change in farmland values, only 2% of bankers expect an increase, on average, and 20% anticipate farmland values to decline,” the bank notes.
“Contrary to recent trends in farmland values, cash rents decreased slightly,” the bank states. “Cash rents across the district declined almost 2%, driven by notable decreases in Kansas, Missouri and Nebraska. Cash rents were unchanged in the Mountain States and continued to increase slightly in Oklahoma, though at a slower pace. The slowdown in cash rents coincides with growing challenges associated with revenue generation for district farmers in 2020,” the bank observes.
The bank notes the stability in farmland values along with government programs are providing needed stability in a very weak financial environment for district farmers.
“Alongside low commodity prices and COVID-19, drought has placed additional pressure on agricultural credit conditions in the western portion of the district,” the bank states. “Compared with the eastern half of the region, a larger share of bankers further west expect farm borrowers to have more problems repaying loans over the next three months, as concerns of drought have intensified. Most of western Oklahoma and the Mountain States were experiencing some level of drought, and large portions of Colorado were in extreme drought. Consequently, more bankers in the western part of the district report weaker credit conditions in the second quarter compared with the east, and about 50% expect repayment rates to decline in the next three months.