Midwestern, Plains Bankers Expect Farmland Prices To Cool

Kansas City Federal Reserve survey shows signs of a slowdown in farmland markets

Published on: Feb 28, 2014

Bankers in the Plains and Midwest are starting to sense a slowdown in farmland markets, according to a fourth quarter credit survey prepared by the Kansas City Federal Reserve Bank.

In a review of the survey, Nathan Kauffman, Omaha, Neb., branch executive, and Maria Akers, associate economist, report that bankers in the Midwest have seen cropland values slow dramatically in the final months of 2013, despite there being less farmland for sale compared to 2012.

In the survey, which reviews credit conditions of the Midwestern agriculture sector as a whole, most bankers surveyed also estimated that farmland values will continue to decline in 2014.

Bankers surveyed said that despite the slowdown, farmers remained active buyers in farm real estate markets, as referenced by the share of farmers buying farmland, which has grown from an average of 63% in 2007 to 76% in 2013. Most purchased land to farm it themselves.

Kansas City Federal Reserve survey shows signs of a slowdown in farmland markets
Kansas City Federal Reserve survey shows signs of a slowdown in farmland markets

A growing number of District bankers felt that farmland values had topped out and could retreat from current highs, Akers and Kauffman explained. At the end of 2012, only 1% of survey respondents expected a decline in cropland values compared with 16% at the end of 2013.

Rental rates
Cropland rental rates also stabilized in the fourth quarter survey, Akers and Kauffman note, remaining relatively unchanged from the previous year. However, ranchland rates rose modestly.

"The slowdown in farmland value gains and increases in cash rent occurred amid expectations of weaker farm income," Akers and Kauffman say. "Agricultural bankers reported farm income fell short of year-ago levels for the third straight quarter, primarily due to lower corn prices."