Seventh Federal Reserve District Only Sees an 1% Drop in 2024 Farmland Values
The Chicago Federal Reserve just issued their annual farmland value report and there was a minor drop in 2024 land values in their district.
The Chicago Federal Reserve represents the states of Illinois, Iowa, Indiana, Michigan and Wisconsin. In their latest Ag Letter, they show that land values in this district fell 1% during 2024 but rose 1% in the last quarter of 2024.
However, this drop might be a little misleading since all of the “I” states saw at least a 2% drop in values, but Wisconsin saw an 8% increase in values during 2024. I had a call with a dairy farm operation in Wisconsin earlier this week and farmland values near Madison approach $20,000, if not higher. It is tough to run a dairy on values that high.
But I also know of dairy operations in Pennsylvania that pay over $30,000 for corn APH of 180.
If you adjust farmland values for inflation, then the drop accelerated to 3.4%, the first real decrease in five years and the largest decrease since 2014.
The report shows the real returns for farmland in the district from 1974 to 2024. During that 51-year period, farmland values only dropped in real terms 17 times. The worst drops occurred during the 1980’s with the worst drop being about 22%. During the farm mini recession of 2014-2019, the maximum drop was only about 4%.
On the positive side, during that same period, we saw 9 years where farmland values increased by more than 10% with the largest increase being about 21% in 1976. Farmland values almost increased by 20% in 2012 and we saw about a 17% increase in 2021.
During that same period, nominal farmland values increased by over 600% and in real terms the increase was over 200%.
Loan repayment rates have steadily decreased over the last two years. During the first three quarters of 2023, the loan repayment rate exceeded 100%. Starting in the fourth quarter of 2023, the rate dropped below 100% and hit a low of 64% in the last quarter of 2024.
Even with these trends, banks indicate that less than 2% of their borrowers will be ineligible for an operating loan in 2025.