MINNEAPOLIS, Minn. (RFD News) — After years of rising farmland prices, values are now starting to slip.
Joe Mahon, regional outreach director for the Federal Reserve Bank of Minneapolis, says the downturn is largely affecting just a small group of states.
“We saw a decline in the average price for an acre of non-irrigated farmland by just below 1%, which is not that significant. And this is in year over year terms. We just asked them what the price, the prevailing price of an acre of good quality farmland is in their area, and we can look at the same respondents who responded in this quarter versus those who responded a year ago, and actually just compare those two. So this is an apples-to-apples comparison over time.”
Mahon says cash rents for production cropland followed suit.
“Now, the decline in cash rental rates is not something new. We’ve actually seen the last couple of years, we’ve seen kind of continued moderate growth in land values as cash rental rates have either kind of leveled out or contracted in some cases. In this case they’re actually moving in the same direction, and this is noteworthy because again land prices right now are historically high.”
Mahon says values remain at the highest rates since the 1980s.
Even with signs of weakness in parts of the Upper Midwest, farmland values remain near record highs across much of the country.
Farmland values remain near record levels across the Midwest and Plains, even as crop producers face tighter margins and weaker credit conditions.
Ty Kreitman with the Federal Reserve Bank of Kansas City reports nonirrigated cropland values averaged about 3 percent higher than a year earlier during the first quarter.
Values increased slightly in the Dallas, Chicago, and Kansas City Federal Reserve districts and were nearly unchanged in the Minneapolis Federal Reserve district. Strong cattle prices also pushed ranchland values sharply higher in some areas.
The land market is holding firm while farm income weakens. Crop producers continue to manage high input costs and drought, while government payments and cattle revenues are helping to limit financial stress.
Credit conditions show pressure building. Nearly 40 percent of lenders in the Chicago, Minneapolis, and St. Louis districts reported lower loan repayment rates than a year earlier. Fewer than 25 percent reported lower repayment rates in the Kansas City and Dallas districts.
Strong land equity continues supporting farm balance sheets, but crop margins and loan repayment trends remain warning signs for lenders and producers.
