Midwest farmland values decreased by 2% in the third quarter of 2014 when compared to previous-year values, according to information gathered last month by the Federal Reserve Bank of Chicago and shared Thursday in the District's AgLetter.
More than 50% of the 224 ag bankers canvassed in the District's survey said farmland values are expected to again drop in the fourth quarter. The district includes Michigan, Iowa and portions of Wisconsin, Illinois and Indiana.
According to the newsletter, authored by Senior Business Economist David Oppedahl, the downturn in crop prices is likely to blame for the sinking land values. Rising farmland values had been the trend since 2009.
Despite the recent decrease, the letter said there was no year-over-year change in farmland values for the district, though there were regional disagreements – Illinois and Iowa, for example, saw land value decreases year-over-year, while Indiana and Michigan saw gains. Wisconsin saw no change.
While the bumper crop has helped cushion the estimated 39% drop in corn prices and 15% drop in soybean prices from a year ago, it has provided only partial compensation, the report said.
Livestock profits, however, have improved from a year ago, but could not "prevent lower readings on farmland values in many places," according to the letter.
Looking forward, the Chicago Fed's survey respondents said this trend is likely continue as grain prices are expected to follow current trajectory and hog, cattle and dairy farmers are likely to see continued profitability on lower feed costs.
Investors and farmers also are less likely to look for farmland acquisitions this fall and winter, 49% of the respondents suggested, and the volume of non-farm real-estate loans is expected to increase.
For more, view the AgLetter from the Federal Reserve Bank of Chicago.