Tuesday, November 15, 2011

Iowa Farmland Prices are Up 31% Year-Over-Year for the Third Quarter of 2011 While the Seventh Federal Reserve District's Farmland Rose 25%

The Federal Reserve Bank of Chicago November 2011
Banker Credit Conditions Survey Including a Farmland Price Report

[Note that the Seventh Federal Reserve District encompasses the northern portions of Illinois and Indiana, southern Wisconsin, the Lower Peninsula of Michigan, and the state of Iowa.]

Key points from the report:
  • At 25 percent, the year-over-year gain in agricultural land values in the third quarter of 2011 for the Seventh Federal Reserve District was the largest in just over three decades.
  • The District’s farmland values surged 7 percent from the second quarter to the third quarter of 2011, matching the highest previous quarterly gain since 1977.
  • Credit conditions for agricultural producers in the third quarter of 2011 remained favorable, as interest rates on farm operating and real estate loans declined further.
  • Funds availability relative to the prior year had not been higher at District banks since 1987.
  • Iowa’s agricultural land values led the District with a year-over-year increase of 31 percent for the third quarter of 2011 (see map and table above).
  • Since District farmland values hit bottom in 1986, the compound annual growth rate for farmland values has been 5 percent (adjusted for inflation).
  • Elevated levels of farm income and heightened demand for farmland continued to support further gains in agricultural land values.
  • Iowa had the lowest rate for farm mortgages (5.24 percent).
  • Indiana had the lowest rate for operating loans (5.44 percent).
  • Only 8 percent of the respondents forecasted more forced sales or liquidations, and 42 percent forecasted fewer.
  • For operating loans, farm machinery loans, and grain storage construction loans, there were more responding bankers who expected augmented volumes than those who expected smaller volumes.
Report written by David B. Oppedahl, business economist
source [pdf]