Agricultural bankers reported a 1 percent rise in “good” farmland values in 2017 in a survey by the Chicago Federal Reserve Bank, which said the productivity of midwestern farmland had helped stabilize prices. It was the first increase in values since 2014, and ended the longest decline in values since the agricultural crisis of the mid-1980s.
“The majority of responding bankers (76 percent) expected farmland values to be stable in the first quarter of 2018,” said the quarterly AgLetter published by the Chicago Fed. “So, more of the same is likely for district agricultural land values in early 2018.” Adjusted for inflation, land values in the district, which covers Iowa, Michigan, most of Wisconsin, and the northern half of Illinois and Indiana, have seen a 10 percent “correction” in values since their peak in 2013.
Land accounts for 80 percent of farm assets, so strong values buttress farm financial health.
The Kansas City Fed said “farm real estate has continued to provide support for the district’s agricultural economy” in the face of weakening farm income. Farmland values held firm in the final months of 2017 and are expected to remain steady through spring, bankers told the Kansas City Fed. “Prior to the fourth quarter, farmland values had declined at an annual pace of 5-7 percent, but those declines appear to have slowed more recently.”
Only limited amounts of farmland were offered for sale in late 2017, helping to bolster land prices, according to ag bankers. More than 75 percent of sales went to farmers, compared with 65 percent a decade ago, before the commodity boom. “The number of sales has declined, but demand for land in the farming sector has remained strong,” said the Kansas City Fed.