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Farmland Values in Fed Survey Unchanged During 2019
USAgNet - 02/14/2020

Farmland values were flat within the Seventh Federal Reserve District during the past year, as some states saw increases in agricultural property while others slipped. According to the latest survey of agricultural lenders in the district, ag property values were unchanged during the fourth quarter of 2019 compared to the same period a year earlier, but rose one percent between the months of October through December from the previous quarter.

In the most recent questionnaire of 142 rural bankers, survey respondents noted that Wisconsin properties were down two percent from last year, but remained study during the fourth quarter. Farmland in Iowa and Indiana rose two percent for the year, but Illinois lost one percent of its value. Michigan trends were not calculated due to the lack of adequate survey responses.

"With inflation taken into account, district farmland values had a yearly decrease of a little over one percent in 2019; in real terms, the decrease in 2019 was smaller than the one in 2018 because of a dip in inflation," said Reserve Economist David Oppedahl. "This was the sixth straight annual real decline. District farmland values fell 13 percent in real terms from their peak in 2013 to the end of 2019. But the decrease in agricultural land values over this span was just six percent in nominal terms.

Oppedahl notes that agricultural credit conditions showed some signs of improvement during the final months of 2019. A slightly smaller percentage of current agricultural borrowers, 2.2 percent, were not likely to qualify for operating credit in 2020. The repayment index rates on non-real estate farm loans for the fourth quarter reached its highest level since late-2014.

"The average loan-to-deposit ratio for the district was 78.9 percent in the fourth quarter of 2019--almost identical to the average of a year ago," he said. "Average interest rates on farm operating, feeder cattle, and farm real estate loans had moved down by the end of 2019 to levels not seen since the end of 2017."

Bankers further indicated that weather challenges had the largest impact on the industry last year. USDA figures show that corn and soybean yields fell drastically from 2018; not to mention that a lot of the crop was not taken off the fields in a reasonable time, or even planted in the first place. The ongoing trade war with China and the emergence of the coronavirus also affected the markets, and thus farm-gate prices.

Looking ahead, most banks are reflecting some 'cautious optimism' about the coming year. Farm real estate loans are expected to have greater volumes in the first three months of 2020. There are also more survey respondents anticipating lower capital expenditures by farmers this year than not. But for Wisconsin dairy farmers, any extra cash in the milk check will likely go toward improvements that have been put on hold in the past five years.

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