Federal Reserve Indicates Flat Land Values
The Chicago Federal Reserve just issued their latest report on Farm Land Values in their district. They were essentially flat.
Iowa was the only state with an increase in farmland values, up only 1%. Illinois saw the steepest drop at 5%, while the district did see an overall small drop of 2%. The district is comprised of the following states:
Illinois
Indiana
Iowa
Michigan
Wisconsin
Total corn production in these five states is approximately 7 billion bushels, almost half of total US production, while soybeans comes in at about 2 billion bushels, which is slightly less than half of the total US crop.
Credit conditions have softened a bit, but are still historically strong, but weakening.
Lower crop prices along with high input costs are putting strains on farmer’s working capital. There has been four quarters of strong increases in demand for non-real estate loans. However, it should be noted that demand had fallen to almost an all-time low in 2021-2022.
Average loan rates have fallen a bit from the high in 2023. Average operating loan rates peaked at about 8.50% and have now dropped to 8.12% and likely are a bit lower due to the 75-basis point reduction by the Fed that occurred late in the quarter and in this quarter.
55% of the bankers did indicate they thought land values were overvalued and many of them expect farmers to have a harder time fully repaying operating loans.