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Slowing Down but Still Gaining Value

Image of Farmland with Trend line imposed

Five key agricultural states in the nation’s midsection are seeing less farmland for sale, fewer potential buyers, and smaller appreciation over the first quarter compared to the previous year, according to the latest AgLetter from the Federal Reserve Bank of Chicago.

The trends focus on the Seventh Federal Reserve District’s farmland region.

Seventh District

  • Illinois

  • Indiana

  • Iowa

  • Michigan

  • Wisconsin

Policy Advisor David Oppedahl said of the trends, “The first quarter of 2024 had an increase in farmland values of around 4% from a year ago and up 2% from a quarter ago. So that’s somewhat slower growth yet still upward momentum for farmland values.”

David Oppedahl
David Oppedahl, Federal Reserve Bank of Chicago Economic Research Department Policy Advisor. Photo courtesy: Federal Reserve Bank of Chicago

The Federal Reserve Bank of Chicago interviewed 141 agricultural bankers to track the latest data changes.

Wisconsin demonstrated the largest growth in values for “good” farmland in the district, according to the report. Values increased 10% over the past year. Illinois was next with 5% appreciation. Iowa was flat.

RELATED: Farmland values rose 6% in Wisconsin in 2023, according to the University of Wisconsin-Madison Agricultural Land Report 2023. Read that here. 

Bankers didn’t report sufficient data for Indiana and Michigan.

Landowners and operators looking for financing may face slightly less favorable circumstances.

 “Agricultural credit conditions seemed to weaken a bit,” Oppedahl said. “For instance, the loan repayment rates and the extensions and renewals of operating loans were all moving in the direction that would indicate credit conditions for agriculture were not as strong as a year ago.”

Producers who previously benefited from federal pandemic aid and higher commodity prices are now not as financially fit as they had been overall.

However, that doesn’t mean that borrowing is expected to rise in all facets of the industry, according to Oppedahl. “…cash flows from last year are tighter, and so working capital is being used up. And then farmers need extra liquidity. But not all those categories are rising.”

Oppedahl pointed out the differences, “… we can anticipate higher volumes of operating loans, cattle loans, and loans that are guaranteed by the FSA, or the Farm Service Agency, relative to a year ago. Loan volumes for things like storage construction and machinery are actually anticipated to be lower. So, it’s different stories for different categories.”

While it may be more difficult to qualify for loans and higher interest rates impact borrowing, Oppedahl said, liquidity is still strong in many places.

“It’s a little more challenging time for the cash flow of farms. And the ability to pay back loans is a little tougher when you have high interest rates. And then you have less liquidity to be able to keep your operation in shape.”

Less liquidity for landowners may push them to borrow. But Oppedahl said, “…that makes it a little more challenging. So, you want to ask for more loans. But at the same time, you’re a little less likely to get them, given that there was a small movement up in terms of the collateral required.”

Less liquidity hasn’t led to little liquidity, though. “Most farm operations are still in good enough shape to qualify for borrowing at this point,” Oppedahl said, “But most farm operations are still in good enough shape to qualify for borrowing at this point.”

FULL REPORT: Read the Federal Reserve Bank of Chicago’s AgLetter on the Seventh Federal Reserve District’s farmland values for the first quarter here. 


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