Ag Lenders Survey Results Revealed
Farmland prices continue to move higher.
Compiled by staff
Published: Aug 19, 2011
Results from the latest survey of agricultural lenders in the Seventh Federal Reserve District show that higher commodity prices continued to drive the value of farmland in the upper Midwest higher during the second quarter of 2011. According to the survey, farmland values between April through June were up 17% from a year ago; and the value of 'good' agricultural land during the three-month period was up 4% from the previous quarter. That represents the largest year-over-year increase since the 1970s.
In the most recent questionnaire of 226 rural bankers, Wisconsin ag property increased by 8% from last year, which is the smallest increase in the five-state district, and went up 4% since the last quarter. Indiana values were the highest at 21% over last year and 5% more than the first quarter. Iowa, Illinois and Michigan also saw double-digit increases from 2010.
The reserve’s economist, David Oppedahl, says agricultural credit conditions were stronger in the second quarter of 2011 relative to a year earlier. But he noted that some bankers expressed concerns about the risks facing farmland markets, especially with regard to declines in crop prices.
"Thirty-six percent of survey respondents anticipated higher farmland values in the third quarter, and 62% expected no change," Oppedahl said. "Higher crop prices have boosted the expected stream of earnings from crop production, supporting further gains in farmland values."
The report showed that repayment rates for non real-estate farm loans were higher than a year ago, while renewals and extensions of these loans were lower. Bankers indicated that the index of non-real-estate agricultural loan demand fell to its lowest level since 1987. Funds availability for lending was up relative to the second quarter of 2010.
Looking ahead, responding bankers expected non-real-estate agricultural loan volumes to decrease in the third quarter of 2011 compared with the same quarter of 2010. Volumes for farm machinery and grain storage construction loans were forecasted to rise during the third quarter of 2011 from a year ago. For the July through September period of 2011, 21% of the respondents anticipated higher farm real estate loan volumes than in the same period a year earlier, while 13% anticipated lower volumes.
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