Aug 15, 2019

Midwest farmland values reported down slightly in second quarter

AgLetter reports farmland values in the Seventh Federal Reserve District were down 1 percent in the second quarter of 2019 from a year earlier. Values for “good” agricultural land in the District were unchanged from the first quarter to the second quarter of 2019, according to a survey of 157 bankers.

In the second quarter of 2019, agricultural credit conditions for the District were weaker compared with a year ago. Repayment rates for non-real-estate farm loans were lower in the second quarter of 2019 than a year earlier. Agricultural credit conditions in the second quarter of 2019 deteriorated relative to a year earlier.

Video and audio excerpts:

“Farmland values over the last year have moved down 1% according to our July survey.”

“The overwhelming message from farmers is that we’re under stress and it’s helpful that the government’s providing some extra assistance, but at the same time it’s a very challenging environment and they hope to get back to more normal trading relationships so that exports can resume to some of the countries that have cut back.”

“The midwest agricultural producers have been struggling with the income issues, and that’s led to a deterioration in credit conditions. As you look at their balance sheets, they’re not in as good position financially, and this is leading to repayment problems as well as a higher rate of loans that are being renewed and extended and not paid off fully at the end of the year.”

On tariffs: “The expectation is in the long term that some of these agricultural markets that took a long time to build will not come back to where they were before. For instance, China will never probably want to buy as high a percentage of their soybeans from the United States as they did prior to the tariff disputes.”  

“When you talk to an agricultural banker from Iowa you may get a bit of a different perspective because in Iowa the crops went in relatively better than they did in Illinois, Indiana and Michigan. So the one banker there was relatively more optimistic in his statements.”

See the attached PDF for a full copy of the August Chicago Fed AgLetter.:

ChicagoFed_AgLetter_august-2019