Illinois Ag Connection - Midwest Farmland Values Were Up During 2009

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Midwest Farmland Values Were Up During 2009
Illinois Ag Connection - 03/09/2010

The value of farmland in the upper Midwest appears to be going back up after heading downward for three consecutive quarters. According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, farmland values between October through December 2009 were two percent higher from a year ago. For the entire year, the annual change in values were also up two percent over 2008. However, that did represent the smallest year-to-year change in over a decade.

In the most recent questionnaire of 214 rural bankers, survey respondents noted that the agricultural sector experienced a challenging 2009--especially with a long, difficult harvest and losses on livestock throughout most of the year. However, they say the majority of the industry's producers rallied toward the end of the year, as a record-setting harvest brought in 13.2 billion bushels of corn and 3.36 billion bushels of soybeans.

Wisconsin farmland values fell six percent and one percent for the year. Indiana and Iowa had higher annual increases in farmland values than the district average.

Meanwhile, Reserve Economist David Oppedahl says agricultural credit conditions in the forth quarter were mixed because of greater financial stress relative to a year ago.

"Non-real-estate loan demand was almost the same in October through December of 2009 compared with the same period of the previous year," Oppedahl said. "Funds availability also improved again in the fourth quarter of 2009. However, farm loan repayment rates in the final quarter of 2009 were below the level of a year ago, and rates of loan renewals and extensions were higher than a year earlier."

He reiterated that agricultural interest rates remained low. And averaging 75.4 percent, loan-to-deposit ratios were essentially the same as in the third quarter of 2009.

In Wisconsin, half of the bankers indicated loan renewals and extensions in the fourth quarter of 2009 were higher than in the prior year, as dairy losses continued to mount. Over eight percent of the volume of Wisconsin banks' agricultural loan portfolios was classified as having major or severe repayment problems, versus four percent for the entire district.

Looking ahead, over 80 percent of respondents expected farmland values to stay unchanged from January through March of 2010 in their respective areas, while six percent anticipated values to increase and 10 percent anticipated values to decrease. And while lower volumes were predicted for feeder cattle, dairy, farm machinery, and grain storage construction loans; higher volumes were predicted for operating loans and loans guaranteed by the Farm Service Agency. Responding bankers anticipated farm real estate loan volumes to lessen during January, February and March of 2010 relative to the same months of 2009.