Farm bankers in the central Plains “expect cropland values to fall alongside reduced expectations for farm income” this year, said the Kansas City Federal Reserve Bank in its quarterly Agricultural Credit Conditions report. Half of the bankers who responded to a survey said they expect land values to fall by up to 10 percent this year; 10 percent of the lenders foresaw a drop of 10 to 20 percent.
In Nebraska, nonirrigated land values were down 3.4 percent at the end of 2014 compared to the previous year, said the KC Fed. In Missouri, the decline was 1 percent. Overall, land values held steady in the district, which covers Nebraska, Kansas, Oklahoma, Colorado, Wyoming, northern New Mexico and western Missouri. Land accounts for more than 80 percent of farm assets, so changes in land value have great impact on the sector. The region includes top wheat and corn states.
“Lower commodity prices and elevated input costs continued to dampen farm income in Nebraska, Kansas and western Missouri,” said the Kansas City Fed. “In fact, farm income growth has weakened annually since 2010, particularly in crop-intensive states such as Nebraska.” Meanwhile, livestock producers saw record profits in 2014.
The bank said “2014 appeared to be a turning point for crop producers,” with slimmer profit margins. “More producers borrowed to pay operating expenses and loan repayment rates fell below year-ago levels. Looking forward, bankers expressed concern that tighter profit margins, higher debt levels and a decline in cropland values may adversely affect farm loan performance in 2015.”