Midwest Bankers Expect Farmland Values to Decline 3%

Posted on 10/22/2018 12:39 PM

Rural bankers across 10 Midwest states report farmland prices declined by 4.0% over the past 12 months and expect farmland prices to fall by another 3.2% over the next 12 months. According to the monthly Rural Mainstreet Index (RMI) survey conducted by Creighton University's Dr. Ernie Goss, approximately one-fifth of bank CEOs expect low farm income and falling farmland prices to present the greatest challenge to banking operations over the next five years.

The farmland and ranchland-price index portion of the RMI for October sank to 34.8 from 37.5 in September. This is the 59th straight month the index has fallen below growth neutral 50.0. According to Fritz Kuhlmeier CEO of Citizens State Bank in Lena, Illinois, "More than ever, farmland values are extremely dependent upon quality, and location, location, location."

The October farm equipment-sales index fell to 33.3 from September' 35.9. This marks the 62nd consecutive month that the reading has moved below growth neutral 50.0.

While agriculture-related indexes in the RMI continue to weaken, the overall RMI expanded to 54.3 from 51.5 in September. The index ranges between 0 and 100 with 50.0 representing growth neutral. "Our surveys over the last several months indicate that the Rural Mainstreet economy is expanding outside of agriculture. However, the negative impacts of tariffs and low agriculture commodity prices continue to weaken the farm sector," says Goss. Adds James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa,"Deteriorating crop conditions and the late harvest are the overriding concerns with our farmers."

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.


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