Strong agricultural income and favorable interest rates are fueling a nonstop climb in farmland values in the Plains and Midwest, said farm bankers in quarterly surveys by the Kansas City and Chicago Federal Reserve banks. The Chicago Fed said farmland values in the opening months of this year were 23 percent higher than in the first quarter of 2021; the increase was 24 percent for non-irrigated land in the Plains.
Bankers in both districts said they expected land values to climb higher this year.
“Even with uncertainty around input costs, lenders expected favorable conditions in the economy to support farm finances and lead to further gains in farmland values in 2022,” said the Kansas City Fed. “The possibility of weaker agricultural income and higher interest rates in the economy remain as risks for farmland markets. Despite the risks, the agricultural sector appears to be well positioned for the year ahead, supported by strong balance sheets, high agricultural commodity prices and sharp gains in farmland values.”
The Chicago Fed said the 23 percent year-on-year increase in farmland values continued the recent steak of sharp year-on-year increases. “Continued robust increases in district agricultural land values partly reflected the vigorous demand for agricultural land,” said the Chicago Fed. “According to an Illinois banker, there was ‘high demand for quality farmland.’”
The Chicago Federal Reserve’s AgLetter was available here.
The Kansas City Fed’s Ag Credit Survey was available here.