Three I States See 5% Annual Gain in Farmland Values

Central Corn Belt farmland values continued to increase in the third quarter amid signs of leveling off, according to the Federal Reserve Bank of Chicago. The bank’s quarterly survey of ag bankers found the value of “good” agricultural land rose 5% versus a year earlier but only a slim 1% versus the previous quarter. That 5% annual increase is the smallest yearly gain recorded in three years, the bank notes.

Looking ahead, 72% of survey respondents anticipate district farmland values will be stable during the fourth quarter of 2023. The remaining 28% are nearly evenly split in their outlook – 13% anticipate them to rise while 15% expect them to decline.

The bank’s district includes the northern two-thirds of Illinois and Indiana, all of Iowa, lower Michigan and southeast Wisconsin.

Indiana led the way higher with a year-over-year gain in farmland values of 16%; Illinois and Wisconsin had annual growth of 6% and 9%, respectively. Iowa’s farmland value was stagnant in nominal terms. On a quarterly basis, Illinois, Iowa and Wisconsin values rose 1% versus the second quarter while Indiana saw no change between quarters.

The bank’s David Oppedahl, who conducts the survey, says: “An Iowa banker expressed surprise that ‘farmland has not retreated in value.’ In contrast, one Wisconsin banker cited ‘competition among large dairy operations’ as the impetus for pushing farmland values higher there, and another noted that ‘nonfarm investors continue to push land prices higher.’”

After being adjusted for inflation with the Personal Consumption Expenditures Price Index (PCEPI), district farmland values were up less than 2% in the third quarter of 2023 relative to a year ago.

The bank says district agricultural credit conditions weakened in the third quarter of 2023 versus a year earlier, as repayment rates for non-real-estate farm loans were no longer higher relative to the same quarter of the previous year. Moreover, renewals and extensions of such loans were slightly higher than a year ago. In the third quarter of this year, demand for non-real-estate farm loans was down relative to a year ago for the 13th quarter in a row.

As of October 1, the district’s average nominal interest rates on new operating loans (8.50%) and feeder cattle loans (8.47%) were at their highest levels since the second quarter of 2007; its average nominal interest rate on farm real estate loans (7.70%) was last as high in the second quarter of 2007.