High commodity prices and low interest rates fueled a sharp 15 percent increase in the value of cropland in the Midwest and Plains in the third quarter, according to surveys of ag bankers by four regional Federal Reserve banks. “Alongside prospects for further strength in commodity markets, the outlook for farm finances and agricultural land values through the end of 2021 remained strong,” said a summary of the surveys.
“The value of unirrigated cropland increased by an average of about 15 percent across all participating districts,” said the report, written by Kansas City Fed economists. It was the highest gain since 2013. The largest increases were in Iowa, up 28 percent; Minnesota, up 26 percent; and South Dakota, up 23 percent, compared to values in the third quarter 2020.
Despite concern about rising cost of inputs such as seed and fertilizer, ag bankers expected farm income and credit conditions to remain strong through the end of this year. The surge in land values bolstered farm balance sheets. Land accounts for 80 percent of farm assets.
“The surge in farm real estate values was consistent across nearly all states,” said the report. “The value of non-irrigated cropland increased nearly 10 percent or more from a year ago in all states with available data, except North Dakota,” which had a 4 percent gain. “Providing support to agricultural real estate markets, interest rates on farm loans remained historically low.”
Conducting the surveys were the Federal Reserve banks in Chicago, Kansas City, Minneapolis and Dallas.