Agricultural bankers say farmland values in the Midwest were 3 percent lower this fall than a year ago. And the decline is expected to continue this fall due to weaker demand for farmland thanks to a prolonged slump in commodity prices, said the Chicago Federal Reserve Bank’s November AgLetter. The decline during the third quarter of this year “marked the fourth straight quarter of year-over-year declines … the first time for such a streak since [the agricultural recession of] 1986-87.”
“Yet, a lack of available properties may be playing a role in keeping farmland values from dropping faster,” said the Chicago Fed. “Survey respondents expected both crop and livestock operations to struggle in terms of net cash farm earnings this fall and winter relative to a year ago.”
In the central and southern Plains, farmland prices were 6 percent lower than a year ago, said the Kansas City Fed in its Agricultural Credit Survey. The year-on-year decline was the sharpest since the mid-1980s. “However, the declines have remained relatively modest. For example, the survey indicated irrigated cropland that might have been valued at $7,000 an acre in 2014, on average, would have been worth about $6,450 in the third quarter of 2016.”
“Although defaults on farm loans remain low, bankers indicated they expect farm income, farmland values and repayment rates to dip further in coming months,” said the regional Fed. “If these expectations hold, the slow but steady increase in farm financial stress appears likely to continue.”