The value of "good" agricultural farmland slipped 1% versus a year earlier through the end of the third quarter, according to the most recent survey of agricultural bankers conducted by the Federal Reserve Bank of Chicago. The bank notes the decline came "despite sings of strength in some areas." The bank also notes farmland values rose 1% in the third quarter compared to the previous quarter.
The banks' David Oppedahl, senior business economist, who conducts the quarterly survey states: "the district has not experienced a year-over-year change in its agricultural land values of greater than 1% over the past 12 quarters—an unprecedented streak of relative stability in farmland values."
He says: "there was substantial variation in farmland value changes among the district’s five states. Farmland values for Illinois and Wisconsin were down on a year-over-year basis (1% and 2%, respectively), while Indiana and Iowa farmland values were both unchanged from a year ago. The district’s agricultural land values were up 1% from the second quarter of 2019, although Illinois experienced a 1% quarterly decrease."
Looking ahead, the survey found 76% of respondents expect land values to remain stable in the fourth quarter of this year. However, the remaining 24% of respondents held a bearish bias with only 6% looking for an increase in values and 18% expecting a decline a farmland values.
The survey finds agricultural credit conditions continue to weaken across the district. Repayment rates for non-real-estate farm loans were down relative to the third quarter of 201, and loan renewals and extensions were up. Demand for non-real-estate farm loans was higher than a year earlier. Also, for the first time since the second quarter of 2017, the availability of funds for lending by agricultural banks was up for a quarter relative to a year ago. In line with these results, the average loan-to-deposit ratio for the district edged down to 78.8% in the third quarter of 2019 from 80.2% in the second quarter (its all-time high). Average interest rates on agricultural loans moved down during the third quarter of 2019, which aided farm borrowers, the bank notes.