Farm Incomes Drop Severely, Land Values Follow

U.S. farmers have lost income and asset value in the third quarter of 2015.

The Federal Reserve Banks of Kansas City and St. Louis agree that farm incomes are falling at a dramatic pace – and farmland values are seeing those effects. After three straight years of bumper crops and declining crop prices, these statistics aren’t abnormal, but the previous consecutive quarters haven’t been this startlingly low. 

In Kansas City’s third-quarter report, the Reserve called the decline in income this quarter “severe” compared to the previous quarters and found that 68% of bankers reported lower farm incomes than just one year ago. 

Ranchland values continued to slowly increase, but irrigated and nonirrigated land didn’t see value growth. Bankers expect all three types of land to lose value in the coming months. Ranchland in the state of Oklahoma had relatively good value compared with other states in the district.

The St. Louis Fed reported that even though farmland values took a 2.6% hit, ranch and pastureland values actually went up by 4.7%. 

Cash rents for quality farmland saw a 0.7% increase while ranch or pastureland rents rose 2.5% during the third quarter, according to the St. Louis Fed. Bankers anticipate cash rents dropping for both types of land, but they're more confident about farmland rents declining.