Farm Credit head sees soft landing for farm values

Farmland values, which have been under pressure the last six months from falling grain prices, are likely to stabilize, according to the head of the largest farm lender.

'Based on what I've been reading, I think it will be a soft adjustment and very manageable at least in the foreseeable future because farmers are in a very strong financial position,” said Jill Long Thompson.

Long Thompson heads the Farm Credit Administration, which oversees the Farm Credit System, the government-backed network of banks that handles nearly half of all loans to farmers.

'We have been anticipating for some time that there would be a stabilization, possibly an adjustment in farmland values particularly in areas where we've seen a pretty steep climb,” she said. 'The lenders learned a great deal from overleveraging back in the late 1970s and early 1980s. We don't have that high level of leveraging in farmland purchases.”

Quarterly surveys by regional Fed banks in the last six months have shown the red-hot demand for farmland that fueled record price gains over the last five years has cooled. Grain prices, led by corn, fell by 30 percent or more following last year's bumper harvests of corn and soybeans. Those two crops account for almost 200 million acres of plantings each year.

Falling crop prices have raised concerns that land prices also might tumble, popping a farmland bubble similar to what happened in the 1980s, causing massive farm failures. Most farmers' loans are collateralized by their land.

The next Fed surveys will be out in mid-May for the first quarter of this year. A widely watched survey of land values in Iowa, the No. 1 corn state, released in late March said farmland prices had eased about 5 percent since September.

The Farm Credit System, Long Thompson said, continued to benefit from disciplined lending to farmers for land and other purchases. She said that balance sheets throughout the system's more than 80 farmer-owned cooperative banks and associations were strong.

'Our data shows us that for the system it's in a very strong position in terms of loan to value,” Long Thompson said.