The Kansas City Federal Reserve Bank says the prolonged decline in farm income pushed farmland values lower in the central and northern Plains, “but at a modest pace” of 3 percent for non-irrigated land during the summer. The Chicago Federal Reserve Bank said land values, although relatively stable for the past year, fell 1 percent during the summer.
“Although the magnitude of recent declines have yet to approach the magnitude of the 1980s, the duration of recent declines has yet to approach that of the 1980s,” said the Kansas City Fed in a quarterly report. High inflation and an agricultural recession sapped the farm sector in the mid-1980s. Land values began to decline earlier this decade following the collapse of the commodity boom. “For the 13th consecutive quarter, a majority of bankers reported that farm income was lower than than a year ago but the the pace of the decline was less significant than in recent quarters.”
The Chicago Fed said Midwestern farmland values fluctuated between a 1-percent decline and a 1-percent gain for the past four quarters. “Such relative stability … had not occurred in the district since 1970s.” Ag bankers generally expect farmland values to be stable in the closing months of 2017.
“Both crop and livestock net cash earnings are expected to shrink this fall and winter from their levels a year ago, based on predictions of survey respondents,” said the Chicago Fed in its quarterly AgLetter. “Nearly two-thirds of the survey respondents expressed the view that a weakening agricultural economy had led to weaker Main Street business activity … Until the outlook for farming improves, the economy of the rural Midwest is likely to remain constrained.”
The Kansas City Fed said that slightly less than half of the ag bankers who replied to its survey expected farm income to decline in the fourth quarter of 2017. “Similarly, bankers expected capital and household spending in the farm sector to decline in the third quarter, but also at a slower pace.”