Fed banks highlight double-digit gains in farmland values
As we’ve reported in LandOwner and on Profarmer.com, farmland values are soaring. Now the Federal Reserve Banks of Chicago, Minneapolis and Kansas City are putting numbers on the annual gains.
In the case of the Chicago Fed Banks, farmland values surged 14% on a year-over-year basis in the second quarter of 2021—their largest such gain in eight years. Values for “good” agricultural land moved up 3% in the second quarter of 2021 from the first quarter, according to a survey of district bankers. This was the third quarterly gain in a row for district agricultural land values; there had not been such a streak since the first quarter of 2013.
With 70% of respondents forecasting higher farmland values during the July through September period and 30% calling for stable values, the bank is expecting values to rise again during the third quarter of this year.
At 14%, the annual increase in the value of district farmland for the second quarter of 2021 was the largest recorded since 2013’s third quarter. All five district states exhibited double-digit year-over-year gains in their agricultural land values. Iowa marked the strongest gain at 18%. Wisconsin followed with 13% and Illinois and Indiana posted 12% increases. On a quarterly basis, Iowa registered a 6% jump. Illinois followed with a 3% gain; Indiana was a 2% boost; and, Wisconsin was unchanged.
Historically low interest rates and strength in the agricultural economy continued to support farm real estate values, reports the Kansas City Federal Reserve. The value of all types of land throughout the district were about 10% higher than a year ago, the largest increase since 2013. As of the second quarter, nonirrigated farmland values were about 14% higher than the beginning of 2019, offsetting the decline of about 12% from 2014 to 2018.
Cash rents on all types of land also increased, but at a slightly slower pace than farmland values, the bank reports. Cash rents on nonirrigated and irrigated cropland rose about 7% from last year, while rents for ranchland increased slightly less than 1%. Similar to land values, the increase in cash rents for non-irrigated and irrigated farmland was the largest since 2013, the bank notes.
The Minneapolis Fed reported, “After halting their half-decade slide and rebounding since late last year, land values and cash rents surged in the second quarter. District nonirrigated cropland values increased by 16% on average from the second quarter of 2020. The district average cash rent for nonirrigated land jumped by more than 9% from a year ago. Rents for irrigated land and ranchland each increased about 6%. Changes in land values and rents were generally consistent across district states,” the bank said.
