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Corn Belt farmland leaps 22% in value, Federal Reserve Bank reports

Iowa leads the way with 30% jump in land values.

There are not many surprises in the world today. That Corn Belt agricultural land values jumped 22% in the last year surely isn’t a surprise, either.

The February report from Seventh Federal Reserve District says that this jump, from January 2021 to January 2022, is the largest jump in the last decade for what its survey respondents consider “good” ground. The Seventh Federal Reserve includes Iowa, Illinois, Michigan, Indiana, and Wisconsin.

“That’s a huge gain. The largest since 2013,” said David Oppedahl, senior business economist at the Federal Reserve Bank of Chicago, in a video recapping the February report.

That agrees with what Jeffrey Obrecht is seeing.

Known as “The Dirt Dealer” and based in Iowa Falls, Iowa, Obrecht reckons land prices for good to excellent farmland are up 25% to 30% in the last year.

“I’ve been in this business for 41 years and this is as strong as I’ve ever seen it,” Obrecht says. “Normally we sell 35 farms per year. In 2021, we sold 76.”

Moreover, more than half the 147 ag bankers who responded to the survey say they expect farmland values to increase from January to March of this year.

“We have 12 auctions booked between now and April 15,” Obrecht says. “They just keep coming. People want to take advantage of the market.”

According to the Fed Report, here are percent changes in dollar value of good farmland, from January 1, 2021 to January 1, 2022:

  • Illinois: +18%
  • Indiana: +22%
  • Iowa: +30%
  • Michigan: +19%
  • Wisconsin: +12%

In the Chicago Fed report, Oppedahl noted that adjusted for inflation, farmland values increased 17%. That’s a good hedge against inflation and could be one reason why more off-farm buyers are bidding on farmland, Obrecht says.

“In a normal year, 80% of the farms I sell are to adjoining landowners and farmers, and 20% are investors or 1031 Exchange,” he says. “Now, it’s about 60% farmers and adjoining landowners, and 40% investors and 1031 Exchange.”

Oppedahl writes in the report that corn and soybean revenues are up due to increased production, and higher crop prices at harvest. Corn yields across the district rose 9.4%, to a record 198 bushels per acre. Soybean yield increased 8.0%, to a record 61 bushels per acre. Plus, farmers in the five states received around $1.5 billion in Coronavirus Food Assistance Program funds in 2021, propelling farm income.

That led to improved ag credit conditions in the Seventh District, according to the Fed report. The share of District farm loans considered having “major” or “severe” repayment problems was 2.1% during the fourth quarter of 2021 – the lowest since 2012.

“Ag lenders are seeing lower demand for their products by ag producers, given that these funds have been flowing into their sector. At the same time, they are having fewer problem loans and fewer defaults,” Oppedahl said in the video.

For 2022, the outlook seems to be bright for beef and dairy cattle. Increased cash rents and production costs will likely tighten margins in the crop sector, Oppedahl says.

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