Fed Survey Confirms Farmland Plateau

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Jeff Caldwell 11/14/2013 @ 3:39pmMultimedia Editor for Agriculture.com and Successful Farming magazine. Though the numbers show a year-over-year double-digit gain in farmland values as of October in the bulk of the Corn Belt, that trend effectively ended at the start of the third quarter, adding evidence to growing sentiment about the reality of a leveling-off and possible downturn in farmland values in the coming months. Farmland was worth 14% this October than it was the same time a year ago, though all but 1% of that gain came in the first 3/4 of the year. The trend definitely leveled off, according to data released by the Federal Reserve Bank of Chicago this week. That’s in line with other recent outlooks that paint a less bullish picture of the Midwest farmland market in the months ahead. “There was a 1% increase in ‘good’ agricultural land values in the third quarter relative to the second quarter of 2013, according to the 195 agricultural bankers that provided responses for the October 1 survey,” according to a report by Fed senior business economist David Oppendahl. “While district farmland values increased on the whole in the third quarter of 2013, this upward trend was not expected to continue: The respondents’ expectations leaned toward a decrease in farmland values in the fourth quarter of 2013, as only 4% anticipated an increase and 21% forecasted a decrease (75% foresaw stable farmland values).” The reversal in land value looks sustainable in the next few months, Fed economists say. That’s mostly because of grain prices. This fall’s corn and soybean crops, despite abnormally dry conditions during much fo the growing season, were larger than most expectations, and that’s fueled lower prices. And, with prices already flirting with breakeven levels, land prices — a critical input cost for Corn Belt crops — will likely continue to trickle lower to keep prices within at least a range of breakeven. “For the 5 District states (Iowa, Wisconsin, Illinois, Indiana and Michigan), soybean production was projected by the USDA to rise 8.5% in 2013 from its 2012 level. Even with the reoccurrence of drought in parts of the District, the third-largest corn harvest and a soybean harvest just outside the top 10 filled storage bins across the Midwest,” Oppendahl says. “Better-than-expected crop yields for the District may have contributed to the momentum of its rising farmland values; however, in areas affected by back-to-back droughts, the loss of revenue from declines in crop prices and yields may have constrained farmland value gains.” http://www.agriculture.com/videos/ Continue reading →

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