Corn Belt land values ​​have soared 23% in the past year

Farmland values ​​in Illinois, Indiana, Iowa, Michigan and Wisconsin collectively jumped 23% from April 2021 to April 2022, according to the May Ag Letter from the Federal Reserve Bank of Chicago. The data comes from survey responses of farm bankers in this region, which is the Federal Reserve’s seventh district.

The momentum is likely to continue, says David Oppedahl, senior economist at the Chicago Federal Reserve, author of the report.

Higher prices paid for farmland led to more farmland being sold in the six months to March, compared to a year ago.

“Given these upward trends, 48% of responding bankers expected the district’s farmland values ​​to be higher in the second quarter of 2022,” Oppedahl writes.

Demand for farmland – especially high-quality farmland – is strong. Investor activity in the farmland sector grew in the three to six months to March 2022 compared to the same period in 2021, according to Seventh District Lenders.

Cash rental rates have increased 11% from 2021 to 2022 across the district, writes Oppedahl. Specifically, cash rents have increased:

• Illinois, 10%

• Indiana, 11%

• Iowa, 12%

• Wisconsin, 8%

• Michigan did not receive enough survey responses.

Oppedahl writes that farmland values ​​and cash rents have increased in part due to rising farm incomes, which are propelled somewhat by global events, including drought in South America and parts of the United States. United, and Russia’s invasion of Ukraine.

Prices received by farmers for livestock and associated products increased by 39%, while crop prices increased by 22%. Rising input costs and dwindling federal pandemic relief funds weighed on farm incomes, Oppedahl says, but commodity prices boosted farm incomes and in turn helped boost farm incomes. farmland values ​​and cash rents.

Despite the demand for farmland, many respondents in Illinois, India and Iowa believe farmland is overvalued. If commodity prices fall and interest rates rise, real estate values ​​will likely fall, he adds.

Other key points from the May Ag Letter are:

* Average nominal interest rates are 4.464% for operating loans; 4.74% for feeder cattle loans and 4.44% for home loans. It’s the highest since 2020, but adjusted for inflation, it’s the lowest since 1974.

* Agricultural credit conditions improved in the first quarter of 2022. Repayment rates are up and only 3% of respondents reported higher levels of loan renewals and extensions compared to the same period last year . Additionally, only 1% of borrowers had more carryover debt in 2022 than in 2021.

* The number of farms and acres sold in winter and spring 2022 is up from a year ago.

Farmland values ​​in Illinois, Indiana, Iowa, Michigan and Wisconsin collectively jumped 23% from April 2021 to April 2022, according to the May Ag Letter from the Federal Reserve Bank of Chicago. The data comes from survey responses of farm bankers in this region, which is the Federal Reserve’s seventh district.

The momentum is likely to continue, says David Oppedahl, senior economist at the Chicago Federal Reserve, author of the report.

Higher prices paid for farmland led to more farmland being sold in the six months to March, compared to a year ago.

“Given these upward trends, 48% of responding bankers expected the district’s farmland values ​​to be higher in the second quarter of 2022,” Oppedahl writes.

Demand for farmland – especially high-quality farmland – is strong. Investor activity in the farmland sector grew in the three to six months to March 2022 compared to the same period in 2021, according to Seventh District Lenders.

Cash rental rates have increased 11% from 2021 to 2022 across the district, writes Oppedahl. Specifically, cash rents have increased:

• Illinois, 10%

• Indiana, 11%

• Iowa, 12%

• Wisconsin, 8%

Michigan did not receive enough survey responses.

Oppedahl writes that farmland values ​​and cash rents have increased in part due to rising farm incomes, which are propelled somewhat by global events, including drought in South America and parts of the United States. United, and Russia’s invasion of Ukraine.

Prices received by farmers for livestock and associated products increased by 39%, while crop prices increased by 22%. Rising input costs and dwindling federal pandemic relief funds weighed on farm incomes, Oppedahl says, but commodity prices boosted farm incomes and in turn helped boost farm incomes. farmland values ​​and cash rents.

Despite the demand for farmland, many respondents in Illinois, India and Iowa believe farmland is overvalued. If commodity prices fall and interest rates rise, real estate values ​​will likely fall, he adds.

Other key points from the May Ag Letter are:

• Average nominal interest rates are 4.464% for operating loans; 4.74% for feeder cattle loans and 4.44% for home loans. It’s the highest since 2020, but adjusted for inflation, it’s the lowest since 1974.

• Agricultural credit conditions improved in the first quarter of 2022. Repayment rates are up and only 3% of respondents reported higher levels of loan renewals and extensions compared to the same period last year. Additionally, only 1% of borrowers had more carryover debt in 2022 than in 2021.

• The number of farms and acres sold in winter and spring 2022 is up from a year ago.