Midwest farmland prices drop overall, but some areas still see increases

Farmland values in the Corn Belt have hit a plateau, dropping 0.4 percent in the second quarter, the Federal Reserve Bank said Thursday, Jesse Newman reports for The Wall Street Journal. "In the Kansas City Fed district, prices for irrigated cropland and farmland without irrigation systems rose less than 1 percent over the same period, with year-over-year gains moderating in states like Kansas and Missouri. Meanwhile, the Chicago Fed district, which includes Iowa and other big farm states, reported a 2 percent increase in farmland values, far less than quarterly gains seen in recent years."

"Bankers surveyed by the St. Louis Fed said the average value of quality farmland in the district fell to $5,473 an acre in the second quarter from $5,496 an acre in the first," Newman writes. "Prices fell 3.5 percent from the same time last year and 6.7 percent from their peak in 2013. For the fourth survey in a row, a larger share of rural bankers in the district said they expect quality farmland values to decline in the next quarter relative to the same period last year.

In the Kansas City region, values increased more than 2 percent "due to strong demand for pasture from livestock producers, whose revenues have climbed this year thanks to low prices for corn, a primary ingredient in livestock feed, and record prices for cattle and pigs," Newman writes. "The Chicago Fed said a temporary jump in commodity prices last spring pushed farmland prices higher in the district in the second quarter, before corn and soybean futures resumed their descent in May. Land values in Indiana fell 1 percent, the bank said." (Read more)

Prices are expected to keep falling, Christopher Doering reports for The Des Moines Register. "The survey, compiled with input from 230 agricultural bankers, found only 2 percent of responding bankers expected farmland values to increase in the third quarter of 2014, while 30 percent anticipated a decline."

A major reason for the decline is that "corn and soybean prices have posted sharp declines as farmers are on track to produce record amounts of each crop this year," Doering writes. "Corn futures for December delivery are at $3.75 a bushel on the Chicago Board of Trade, down from an average of $6.89 two years ago; while November soybeans are averaging $10.56 a bushel compared with $14.40."

The U.S. Department of Agriculture said in February that farm income will fall 27 percent to $95.8 billion in 2014 "as farmers feel the impact of lower corn and soybean prices and reduced government payments," Doering writes. "Still, the data released by the government showed the farm economy will remain historically strong, with 2014 net farm income the seventh highest since 1973 after adjusting for inflation, and $8 billion higher than the average of the previous 10 years." (Read more)