Corn, soybean prices hurt land values in Iowa

Midwest farmland values declined last year for the first time in 28 years, according to a report from the Federal Reserve Bank of Chicago.

The value of 'good” farmland fell 3 percent from Jan. 1, 2014, to Jan. 1, 2015, in the district that includes Iowa, Illinois, Indiana, Michigan, and Wisconsin. The decline in large part was due to the drop in soybean and corn prices, according to David Oppedahl, senior economist at the Federal Reserve Bank of Chicago.

The report was based on a quarterly survey of 224 agricultural banks across the region.

Iowa farmland values dropped 7 percent in the year that ended Jan. 1 and 1 percent from Oct. 1, 2014, through Jan. 1.

While Iowa, Illinois and Indiana experienced declines in agricultural land values on a year-over-year basis, Wisconsin recorded a modest increase, and Michigan values were unchanged.

Oppedahl said record levels of corn and soybean production are to blame for the drop in values.

'The nation's corn production for 2014 reached a record high of 14.2 billion bushels, 2.8 percent higher than the 2013 harvest,” Oppedahl said. 'Soybean production hit a record high of 3.97 billion bushels in 2014, 18 percent higher than the 2013 harvest.”

As late as three years ago, farmland prices soared, climbing 16 percent as demand remained strong despite the worst drought in 50 years.

'Adjusted for inflation, the district's annual decrease in agricultural land values for 2014 was the first one since 1992,” Oppedahl said. 'The streak of annual increases in district farmland values in real terms had reached 21 years before being broken in 2014.”

Oppedahl said the impact of falling crop prices has been offset to some extent by improving returns for livestock producers throughout 2014.

Farmland values are tracked by government economists as a gauge of the economy and health of the banking system.