According to recent quarterly agricultural surveys released last week. Federal Reserve bankers in the tenth and eighth districts encompassing the Midwest and Plains say in general lower land values and farm incomes are expected for the coming months.
In the 10th district, which includes Kansas, Colorado, Wyoming, Nebraska, Oklahoma and parts of New Mexico and Missouri, 228 banks responded to the quarterly ag questionnaire.
According to the survey, the value of non-irrigated farmland dipped 1.4% from the fourth quarter of 2013 to the first quarter of 2014, and irrigated farmland values rose just 0.5%. In contrast, strong demand for high-quality grazing pastures bolstered ranchland values, which increased 2.6% from the fourth quarter of 2013.
In keeping with these trends, some bankers expected additional easing in cropland values in the next three months but felt that ranchland values could strengthen further, say report authors Nathan Kauffman, Omaha branch executive and Maria Akers, associate economist.
Much of that change rests upon moderating crop prices and few expected changes in the way of lower crop inputs, while the lower crop prices strengthen livestock businesses.
Though higher wheat prices are expected on drought-stunted crops, Akers and Kauffman say higher prices may not fully compensate for lower yields.
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In the eighth district Federal Reserve, covering parts of Illinois, Indiana, Kentucky, Mississippi, Tennessee, Arkansas and eastern Missouri, 49 region bankers also reported decreases in farmland prices.
Though falling slightly in the first quarter, and reversing gains reported in the fourth quarter of 2013, farmland prices still measured 7.5% higher compared to year-ago levels.
The decline, however, appears less severe than respondents expected according to a previous quarterly survey, the St. Louis Fed said. Even so, a majority of agricultural bankers continue to expect farmland values will decline over the next three months compared with year-earlier levels.
Similar to the situation with farmland prices, a majority of bankers also expect both household expenditures and farm equipment expenditures for the second quarter of 2014 to trend downward from year-earlier levels, even though expenditures by farm households in the first quarter slightly exceeded spending levels from one year ago.
Contrary to some land-grand expectations for cropland rents in the Midwest, the St. Louis Fed region bankers said cash rents on quality farmland reflect a slight upward bias and expect stronger cash rents for ranchland or pastureland over the next quarter.