Business

Iowa farmland values slip in second quarter

Many borrowers affected by extreme weather

Farmland and rolling hills make up Iowa’s driftless region along Highway 9 near Lansing, Iowa, on Friday, June 22, 2018. (Jim Slosiarek/The Gazette)
Farmland and rolling hills make up Iowa’s driftless region along Highway 9 near Lansing, Iowa, on Friday, June 22, 2018. (Jim Slosiarek/The Gazette)

Iowa’s farmland value has dropped, even though a trio of nearby states’ land have stayed the same.

“Iowa and Michigan had year-over-year dips in their farmland values, but Illinois, Indiana and Wisconsin farmland values held steady,” said David Oppedahl, senior business economist with the Federal Reserve Bank of Chicago, citing a survey of 157 bankers.

“After being adjusted for inflation with the Personal Consumption Expenditures Price Index, district farmland values were down 2 percent in the second quarter of 2019 from the second quarter of 2018.”

Oppedahl noted that the streak of year-over-year declines in real farmland values was extended to five full years.

Overall, the value of an average acre of good farmland in the Seventh Federal Reserve District dipped 1 percent in the second quarter from the same period of 2018, according to the survey.

The survey found the value of “good” farmland unchanged in the quarter that ended June 30 from the first quarter of this year.

Oppedahl said 83 percent of survey respondents expected agricultural land values to be unchanged in the current quarter, 2 percent expected them to increase and 15 percent expected them to decline.

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The Fed survey results were in line with an earlier poll conducted by the Realtors Land Institute that found a 1 percent decline in Iowa farmland values between Sept. 1, 2018, to March 1 of this year.

Bankers indicated that 69 percent of their borrowers were at least modestly affected by extreme weather events in the first half of 2019. Excessive rainfall in the spring led to historic flooding and widespread planting delays across most of the Midwest.

Agricultural credit conditions for the Seventh Federal Reserve District were weaker in the second quarter compared with the same period of 2018. Repayment rates for non-real-estate farm loans were lower in the second quarter of 2019 than a year earlier.

The portion of the district’s agricultural loan portfolio reported as having “major” or “severe” repayment problems — 6.2 percent — had not been higher in the second quarter of a year since 1999.

The demand for non-real estate farm loans was higher in the second quarter than a year earlier, but the availability of funds for lending by agricultural banks was lower.

With lower yields expected across the Midwest due to the extreme weather delaying or, in some cases, eliminating planting, corn and soybean prices should adjust upward. However, tariffs on agricultural exports are limiting how much crop prices can increase.

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