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Fed: Last year's Corn Belt farmland value increase higher than expected

Agriculture.com Staff 08/28/2007 @ 8:29am

Farmland values climbed 11% in the last year in the Seventh Federal Reserve District comprising Iowa, Wisconsin, Michigan and northern Illinois and Indiana, according to survey results released earlier this month by the Federal Reserve Bank of Chicago.

From July 1, 2006, to July 1, 2007, farmland rated "good" saw the greatest rise in Iowa, where an 18% jump in value was observed, according to Federal Reserve Bank of Chicago business economist David Oppendahl. Good land rose in value by 12% in Wisconsin during the same time, followed by an 11% gain in Indiana. As a whole, the Fed's seventh district saw an 11% value rise during the year, with two percent of that increase coming between April 1 and July 1, 2007.

Data was gleaned from a survey of ag bankers around the Fed's seventh district. Oppendahl says the survey results indicate across-the-board increases in farm output prices are the main valuation drivers in the seventh district.

"Higher crop and livestock prices propelled farmland values to higher levels, as the expected stream of earnings from farming increased from a year ago," Oppendahl says. "Elevated corn prices, running 51% higher than a year ago in July, had a particular impact on the District, since over half of U.S. corn production comes from the five-state region."

Where do survey respondents see farmland values going in the near future? While many see values increasing through the next quarter, the majority surveyed said the value climb will likely level off into this fall.

"Survey respondents expected increases in farmland values to continue in the third quarter of 2007. With 42% of the respondents expecting gains in land values between July and September, and two percent forecasting decreases, there seemed to be momentum for further land value increases," Oppendahl says. "However, 56% of those surveyed anticipated farmland values to remain stable in the third quarter."

Through September, the ag bankers surveyed in the Seventh Federal Reserve District said non-real-estate farm loans will be on the rise compared to both a year ago and the previous quarter, Oppendahl says. Loans for operating, farm machinery and grain storage are forecast to grow in volume.

"Agricultural credit conditions were better than a year ago, with higher non-real-estate loan demand and availability of funds in the second quarter," he says.

Farmland values climbed 11% in the last year in the Seventh Federal Reserve District comprising Iowa, Wisconsin, Michigan and northern Illinois and Indiana, according to survey results released earlier this month by the Federal Reserve Bank of Chicago.

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