Farmland values fall in first quarter

Agricultural land values in the Seventh Federal Reserve District, which includes Iowa, fell 4 percent from a year ago in the first quarter of 2016 - the largest year-over-year decline since the third quarter of 2009.

The value of 'good” Iowa farmland fell 1 percent from Jan. 1, 2016, to April 1, and 5 percent from April 1, 2015, to April 1, 2016, according to the Federal Reserve Bank of Chicago. The report is similar to the results of a survey by the Iowa Chapter of the Realtors Land Institute that found Iowa farmland values fell by 5 percent from Sept. 1, 2015, to March 1, 2016.

Demand to purchase agricultural land was markedly lower in the three- to six-month period that ended with March 2016 compared with the same period that ended with March 2015. The amount of good farmland for sale, the number of farms sold, and the amount of acreage sold were all down during the winter and early spring of 2016 compared with a year ago.

'Nearly two-thirds of the responding bankers expect farmland values to decrease during the second quarter of 2016, with the rest expecting farmland values to remain stable,” said David Oppedahl, Federal Reserve Bank senior business economist, in a news release.

'Cash rental rates for Seventh Federal Reserve District farmland experienced a significant drop of 10 percent for 2016 compared with 2015 - even larger than the decrease of last year relative to 2014. Average annual cash rates to lease farmland were down 9 percent in Illinois, 10 percent in Indiana, 10 percent in Iowa, 2 percent in Michigan, and 7 percent in Wisconsin.”

Oppedahl said agricultural credit conditions were weaker in the first quarter of 2016 compared with the first quarter of 2015. Sixty-eight percent of the bankers responding to the survey reported lower rates of loan repayment. Twenty-eight percent of the farmers surveyed indicated that their banks required larger amounts of collateral for loans during the January-through-March period of 2016 compared with the same period last year.

'Agricultural land values were expected to continue falling, as nearly two-thirds of the survey respondents predicted farmland values will decrease in the second quarter of 2016 and none predicted farmland values will increase,” Oppedahl said. 'Farm real estate loan volumes are projected to be down in the second quarter of 2016, compared with the second quarter of 2015.”