Midwest farmland values surged 25% from Oct. 2010 to Oct. 2011, the Federal Reserve reported today. That year-over-year gain is the highest in just over three decades. The district covers land values Illinois, Indiana, Michigan, Iowa and Wisconsin.
Moreover, the quarterly increase in the value of "good" farmland was 7%, the highest increase since the late 1970s.
Iowa's agricultural land values led the District with a year-over-year increase of 31% for the third quarter of 2011. Indiana enjoyed a 29% increase, followed by Illinois at 23% and Wisconsin at 17%. Michigan's land values increased 16% compared to this time last year.
According to the 216 bankers who responded to the October 1 survey, agricultural land values were poised to rise in the fourth quarter of 2011, reports David B. Oppedahl, the Fed's business economist.
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.
However, there was also a slight tilt toward requiring higher levels of collateral to qualify for loans. Repayment rates for farm loans rose in the third quarter of 2011 relative to those of a year ago, while loan renewals and extensions declined.
Funds availability relative to the prior year had not been higher at District banks since 1987. Dampened demand persisted for non-real-estate loans in the period
from July through September of this year compared with the same period of 2010. Declining to a new post-1997 low, the average loan-to-deposit ratio was 69% for the District.
Just over half of the bankers who responded to the survey expected the volume of farm loan repayments to rise over the next three to six months compared with a year ago. Only 3% thought repayment rates would go down.
According to bankers participating in the survey, forced sales or liquidations
of farm assets among financially stressed farmers should decline in the next three to six months in all District states. Only 8% of the respondents forecasted more forced sales or liquidations, and 42% forecasted fewer.