U.S. farmland values will hold steady or decline somewhat in the near term due to lower grain prices and high production costs, lenders and financial experts told a House Agriculture subcommittee. Land values are important, said the American Bankers Association, because 82 percent percent of farm and ranch wealth is real estate. The Independent Community Bankers Association said when it polled its Rural America panel, “Generally, bankers stated farm income and farmland values would decline or remain stable.”
Economist Nathan Kauffman of the Kansas City Federal Reserve Bank said high farm income from 2009-13 put many producers in a strong financial position ahead of USDA’s forecast that farm income will drop by more than 20 percent this year. “If profit margins remain under pressure in the crop sector and debt continues to rise, the ability of crop producers to withstand an increase in financial stress may be a concern, even as the outlook for the livestock sector has improved,” Kauffman said. Producers with lower levels of equity, such as young and beginning farmers, “may be most vulnerable to financial stress,” he said.
Farmers who rent land may face greater financial stress than those with no land rental costs, said Jill Long Thompson, head of the Farm Credit Administration. A USDA official asked for more funding to meet the high demand for USDA credit programs – highest since the farm crisis of the mid-1980s. By law, USDA is lender of last resort for credit-worthy producers who cannot get financing elsewhere.
U.S. farmland values have risen annually since a slight wobble in 2009 to reach an average $2,730 per acre in 2013, an 8 percent increase from the preceding year, say USDA data.