Fed Banks Report Falling U.S. Farmland Values in First Quarter
Declines in Value of Midwestern Agricultural Land Come After Drop in U.S. Grain and Soy Prices
Farmland values fell in the first quarter in much of the Midwest, the latest sign of a downturn in the market after a yearslong boom fueled by rising commodity prices, according to Federal Reserve reports on Thursday.
Average prices for agricultural land in the Federal Reserve Bank of St. Louis's district, which includes parts of Illinois, Indiana and Missouri, fell 6% in the first quarter from the prior quarter, the bank said.
Prices for nonirrigated farmland in the Kansas City Fed district, which includes Kansas and Nebraska, declined 1.4% over the same period. Meanwhile, the Chicago Fed reported a 1% quarter-to-quarter decline, the first in five years for a district that includes Iowa, Michigan and parts of Illinois and Indiana.
The reports indicate the U.S. farmland market has softened further, after cooling last year as U.S. grain and soybean prices fell sharply amid large harvests. Farmers produced the biggest corn crop ever last autumn, just one year after the nation's worst drought in decades drove prices for the grain to record highs. Corn futures prices at the Chicago Board of Trade have fallen 24% over the past 12 months.
The slump in cropland values marks a turning point in the U.S. Farm Belt. From 2009 to mid-2013, average prices for farmland rose by half, according to federal data, reflecting one of the U.S.'s largest recent asset booms. The gains fueled concerns about a bubble, though economists have noted that farmers today carry relatively low debt levels.
The market for farmland is "lukewarm," said Jim Benham, who grows soybeans near Versailles, Ind. "Back when we were having the drought and looking at $8 [a bushel] corn, folks were a heck of a lot more aggressive than they are now."
The average value of quality farmland in the St. Louis Fed's district fell to $5,496 an acre in the first quarter from $5,868 an acre in last year's fourth quarter, according to the bank's survey of agricultural lenders.
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