Despite the devastating impact of the COVID-19 pandemic, the value of central Corn Belt farmland values remained unchanged from a year earlier. That’s according to the quarterly survey of agriculture bankers conducted by the Federal Reserve Bank of Chicago.
While up overall for the bank’s district, which consists of the northern two-thirds of Illinois and Indiana, all of Iowa, the lower peninsula of Michigan and southeastern Wisconsin, the gain was driven primarily by Indiana’s 4% annual gain. Wisconsin contributed a 1% rise. Illinois and Iowa remained unchanged for the year.
The bank survey indicates values were unchanged from the first quarter of 2020 with Wisconsin posting a 3% quarterly rise and Illinois posting a 1% increase. Both Indiana and Iowa noted a 1% decrease compared to the previous quarter.
After being adjusted for inflation with the Personal Consumption Expenditures Price Index (PCEPI), district farmland values were still up slightly in the second quarter of 2020 from the second quarter of 2019, given that inflation slowed. This uptick broke a streak of year-over-year declines in real farmland values that had extended back six years.
Looking ahead, 79% of responding bankers expect district agricultural land values to be stable during the third quarter of 2020.
These results bely the wallop taken by the economy, states the bank’s David Oppedahl, who conducts the quarterly survey. “Respondents indicate 97% of their lending areas were at least modestly affected by the pandemic in the first half of 2020—larger than the reach of extreme weather events in 2019. Moreover, according to responding bankers, 30% of their agricultural borrowers were significantly affected by the pandemic in the first six months of 2020 and another 51% were modestly affected,” he says.
Oppedahl states USDA estimates prices for the 2020–21 crop year of $3.35 per bu. for corn and $8.50 per bu. for soybeans. When calculated with these prices, the projected revenues from the 2020 U.S. harvests relative to revenues from the previous year’s would be 2.5% larger for corn and 15.7% larger for soybeans. So, even with lower expected crop prices, corn and soybean revenues in 2020 should bounce back from their levels in 2019, when they struggled. Farmland values seemed to benefit not only from the rebound in crop revenues and higher government payments, but also from lower nominal interest rates and a “flight to safety” mentality spurred by the pandemic,” he concludes.