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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1943	

AgLetter

February 2009

(see chart 1 on next page). Indiana had a 1 percent annual
decrease in farmland values (see table and map below).
In contrast, Wisconsin had a 13 percent annual increase in
farmland values, catching up with the District after lagging
at the end of 2007. Having values between these two extremes in the District, the annual gains for Illinois, Iowa,
and Michigan were substantially smaller than a year ago.

FARMLAND VALUES AND CREDIT CONDITIONS
Summary
Farmland values declined in the fourth quarter of 2008 for
the Seventh Federal Reserve District—the first quarterly
decrease in a decade. There was still an annual increase of
5 percent in the value of “good” agricultural land for 2008,
based on 209 surveys completed by District agricultural
bankers. Few respondents expected farmland values to
rise in the first quarter of 2009, but 35 percent expected
them to fall in their respective areas.

For the first time in a decade and only the second time
since 1986, overall District land values experienced a quarterly decline. Only Wisconsin did not experience a quarterly drop in land values for the fourth quarter of 2008.

Agricultural credit conditions in the District continued
to strengthen in the fourth quarter of 2008, though not as
strongly as a year ago. Non-real-estate loan demand grew
in the final quarter of 2008 relative to that of 2007. Also, the
index of funds availability was higher in the fourth quarter
of 2008 than in the third quarter of 2008. Farm loan repayment rates improved, while loan renewals and extensions
edged down from a year ago. Agricultural interest rates were
at the lowest levels in almost five years. Loan-to-deposit
ratios averaged 76.4 percent for the fourth quarter of 2008,
with nearly half of the banks below their desired ratio.

An annual index of nominal farmland values doubled by the end of 2008 from its 1981 peak (see chart 2 on
next page). Adjusted for inflation, annual farmland values
increased only 1 percent in 2008, much less than the nominal
increase. Moreover, an index of inflation-adjusted farmland values remained well under its peak in 1979. The
slower growth in real farmland values during 2008 kept
the District from nearing this peak.
Even though net farm income in 2008 set a record, net
farm income at the end of the year had not risen as much as
many had anticipated, and it looked ready to decline in 2009.
These factors played a key role in slowing the growth of
farmland values. Elevated net farm income spurred farmland values upward faster in the first three quarters of

Farmland values
The District’s 5 percent annual increase for 2008 in the value
of “good” agricultural land was the lowest since 2001

Percent change in dollar value of “good” farmland
Top:
October 1, 2008 to January 1, 2009
Bottom: January 1, 2008 to January 1, 2009
	
	
	
Illinois	
Indiana	
Iowa	
Michigan 	
Wisconsin	
Seventh District	

October 1, 2008	
to	
January 1, 2009	
–  	
3
–  	
4
–  	
6
–  	
4
0	
–  	
4

January 1, 2008	
to
January 1, 2009
+6
– 
1
+4
+2
+13
+5

VI
0
+11
I
– 
6
+5

II
– 
9
– 
6
– 
5
III +6

– 
3

*
VII
0
+16

IV

+7

XIV
*

X
0
+4 VIII

V
–4
+9

*Insufficient response.

XII

*

IX
+4
+7

XV

XI
– 
6
+8

XVI

– 
1
+4

– 
5
– 
3

1. Annual percentage change in Seventh District
farmland values
percent
30
20
10
0
–10
–20
–30
1972

’76

’80

’84

’88

’92

’96

2000

’04

’08

Source: Author's calculations based on data from Federal Reserve Bank of
Chicago farmland value surveys.

2008 as corn and soybean prices peaked in the summer. Cash
corn prices fell to $3.35 per bushel in December, almost
50 percent below prices in June. Cash soybean prices
dropped to $8.45 per bushel in December, 43 percent under
prices in July. National production estimates for 2008 from
the U.S. Department of Agriculture (USDA) were 12.1 billion
bushels for corn and 2.96 billion bushels for soybeans. Across
the nation, the harvest of 2008 was 7 percent below that of
2007 for corn and 11 percent above that of 2007 for soybeans. From a year earlier, District production decreased
8 percent for corn and increased 7 percent for soybeans.
According to the USDA, the value of crop production
in the U.S. climbed to $182 billion in 2008—an increase of
21 percent from 2007. However, lower crop prices were estimated to reduce the value of crop production to $161 billion
in 2009. The global recession and accompanying decline in
oil prices hurt crop prices, since demand for food, feed, and
biofuels ebbed. For the 2008–09 marketing year, the slower
pace of demand was projected to leave U.S. ending corn
stocks at 1.79 billion bushels and soybean stocks at 210 million bushels. The corresponding stocks-to-use ratios were
expected to be 15 percent for corn and 7.1 percent for soybeans. These more ample supplies of corn and soybeans
contributed to lower USDA forecasts of crop prices.
Additionally, the value of livestock production was
predicted to decline to $132 billion in 2009 from $143 billion
in 2008. Direct government payments to agriculture were
anticipated to be $11.4 billion in 2009, 8 percent down from
2008. After accounting for a smaller decrease in input costs
and payments to laborers, creditors, and landlords, the
USDA forecasted net farm income for 2009 at $71.2 billion,
down from $89.3 billion in 2008. Given these conditions,
just 4 percent of respondents expected farmland values
to increase from January through March of 2009, while
35 percent expected values to decrease and 61 percent
expected values to remain the same.

Credit conditions
District credit conditions improved once again, although
credit standards were stiffer. Demand for non-real-estate
loans during October, November, and December of 2008
grew from a year ago, continuing five years of growth. The
index of loan demand was 115, with 33 percent of respondents reporting an increase in the demand for non-realestate loans and 18 percent reporting a decrease. The rate
of renewals and extensions of loans in the fourth quarter
of 2008 fell compared with the fourth quarter of the previous year. Eleven percent of District bankers noted higher
renewals and extensions in the final quarter of 2008 than
a year ago, and 15 percent noted lower levels. In contrast
with the rest of the District, Wisconsin experienced a higher
rate of loan renewals and extensions in the fourth quarter of 2008 than in the final quarter of the previous year.
Funds became more available in the fourth quarter of
2008 compared with a year ago. The index of funds availability increased to 110, with 24 percent of the respondents
seeing higher funds availability and 14 percent seeing
lower funds availability. Collateral requirements were
more restrictive at District banks, as 22 percent raised the
amount of collateral required during the October–December
period in 2008. Almost half of the respondents reported
tighter credit standards for agricultural loans in the fourth
quarter of 2008 compared with a year ago; none reported
easier standards. Close to 2 percent of District customers
with operating credit were not likely to qualify for new
credit in 2009, with Wisconsin’s 5 percent having the
largest role in raising the average from 2008.
Loan repayment rates in the fourth quarter of 2008
improved from a year ago. The index of non-real-estate
farm loan repayment rates was 113 in the final quarter of
2008, with 25 percent of the bankers indicating higher
rates of loan repayment and 12 percent reporting lower

2. Indexes of Seventh District farmland values
index, 1981=100
250
200

Nominal
farmland values

150

Farmland values
adjusted by CPI-U

100
50
0
1972

’76

’80

’84

’88

’92

’96

2000

’04

Sources: Author's calculations based on data from Federal Reserve Bank
of Chicago farmland value surveys; and U.S. Bureau of Labor Statistics,
Consumer Price Index for All Urban Consumers (CPI-U).

’08

Credit conditions at Seventh District agricultural banks

						
	
Interest rates on farm loans
		
						
		
Loan	
Funds	
Loan	
Average loan-to-	
Operating	
Feeder	
Real
		
demand	
availability	
repayment rates	
deposit ratio	
loansa	
cattlea	
estatea
		

(index)b	

(index)b	

(index)b	

2006
	 Jan–Mar	
	 Apr–June	
	 July–Sept	
	 Oct–Dec	

131	
115	
124	
109	

102	
101	
95	
116	

87	
85	
87	
130	

76.7	
78.0	
79.1	
76.6	

8.30	
8.76	
8.73	
8.71	

8.27	
8.66	
8.70	
8.70	

7.48	
7.85
7.82
7.74

2007
	 Jan–Mar	
	 Apr–June	
	 July–Sept	
	 Oct–Dec	

128	
121	
118	
110	

113	
115	
118	
126	

131	
117	
122	
149	

78.4	
77.8	
78.1	
77.2	

8.61	
8.65	
8.42	
7.82	

8.60	
8.63	
8.40	
7.89	

7.67
7.70
7.53
7.09

2008
	 Jan–Mar	
	 Apr–June	
	 July–Sept	
	 Oct–Dec	

110	
101	
117	
115	

129	
124	
103	
110	

147	
137	
115	
113	

75.9	
75.2	
78.8	
76.4	

6.74	
7.06	
6.74	
6.21	

6.86	
6.77	
6.85	
6.33	

6.41
6.51
6.56
6.23

(percent)	

(percent)	

(percent)	

(percent)

At end of period.
Bankers responded to each item by indicating whether conditions during the current quarter were higher, lower, or the same as in the year-earlier period. The index numbers are computed by
subtracting the percent of bankers that responded “lower” from the percent that responded “higher” and adding 100.
Note: Historical data on Seventh District agricultural credit conditions are available for download from the AgLetter webpage, www.chicagofed.org/economic_research_and_data/ag_letter.cfm.

a

b

rates. In Wisconsin, lower rates of repayment prevailed.
Less than 3 percent of the volume of the banks’ agricultural loan portfolios were classified as having major or
severe repayment problems, about the same as in 2007.

higher spending in 2009 on land purchases or improvements, while 44 percent expected lower spending. For buildings and facilities, 13 percent forecasted higher spending
and 51 percent forecasted lower spending.

Agricultural interest rates moved down to the lowest
levels in five years. The rate on operating loans dipped under
the 2004 low of the previous cycle. As of January 1, 2009,
the District averages for interest rates were 6.21 percent
on new operating loans and 6.23 percent on farm real
estate loans. It has been 30 years since the operating loan
rate was lower than the mortgage rate. Interest rates on
operating loans were lowest in Indiana (5.68 percent)
and highest in Wisconsin (6.63 percent). Interest rates
on agricultural real estate loans were lowest in Illinois
(6.13 percent) and highest in Indiana (6.54 percent).

The prospects for purchases of machinery and equipment were somewhat better, especially in Illinois, with
25 percent of respondents anticipating higher purchases
and 39 percent anticipating lower purchases. Expenditures
on trucks and autos were predicted to drop relatively
more, as 13 percent of the bankers expected higher
spending by farmers and 41 percent expected lower
spending. Thus, these investments in the agricultural
sector of the District were projected to be less in 2009
than in 2008.

Looking forward
For the first quarter of 2009, additional growth in non-realestate loan volumes was anticipated by the respondents,
with 43 percent expecting higher volumes and 16 percent
expecting lower volumes. Increases in loan volumes were
forecasted for operating loans, farm machinery loans, and
loans guaranteed by the Farm Service Agency. Decreases
in volumes were anticipated for feeder cattle, dairy, and
grain storage construction loans. The volume of mortgages
on agricultural real estate was predicted to shrink, with
15 percent of the bankers expecting higher real estate
loan volumes during January, February, and March of
2009 and 19 percent expecting lower volumes.
In a reversal from a year ago, 2009 capital expenditures by farmers were predicted to fall from the levels of
2008, according to respondents. Fifteen percent expected

David B. Oppedahl, business economist
AgLetter (ISSN 1080-8639) is published quarterly by the
Research Department of the Federal Reserve Bank of Chicago.
It is prepared by David B. Oppedahl, business economist, and
members of the Bank’s Research Department. The information
used in the preparation of this publication is obtained from
sources considered reliable, but its use does not constitute an
endorsement of its accuracy or intent by the Federal Reserve
Bank of Chicago.
© 2009 Federal Reserve Bank of Chicago  
AgLetter articles may be reproduced in whole or in part,
provided the articles are not reproduced or distributed for
commercial gain and provided the source is appropriately
credited. Prior written permission must be obtained for any
other reproduction, distribution, republication, or creation of
derivative works of AgLetter articles. To request permission,
please contact Helen Koshy, senior editor, at 312-322-5830
or email Helen.Koshy@chi.frb.org. AgLetter and other Bank
publications are available at www.chicagofed.org.

Selected agricultural economic indicators

Percent change from

	
	
	
	

Latest		
period	
Value	

Prior	
period	

Year	
ago	

Prices received by farmers (index, 1990–92=100)	
	 Crops (index, 1990–92=100)	
		 Corn ($ per bu.)	
		 Hay ($ per ton)	
		 Soybeans ($ per bu.)	
		 Wheat ($ per bu.)	
	 Livestock and products (index, 1990–92=100)	
		 Barrow and gilts ($ per cwt.)	
		 Steers and heifers ($ per cwt.)	
		 Milk ($ per cwt.)	
		 Eggs ($ per doz.)	

January	
January	
January	
January	
January	
January	
January	
January	
January	
January	
January	

137	
157	
3.61	
136	
9.70	
5.90	
115	
41.80	
86.30	
13.80	
1.03	

1.5	
5.4	
7.7	
–  .5	
3
14.7	
–  .2	
1
–  .4	
3
–  .2	
0
0.8	
–  1.5	
1
3.1	

– 5	
 
–  	
1
–  1	
2
8	
–  9	
1
–  6	
2
–  1	
1
10	
–  	
8
–  3	
3
–  0	
2

11	
20
–  	
1
25
46 
30	
2
–  	
4
–   
4
–  	
5
13

212	
219	

–  .8	
0
0.0	

0	
5	

4	
10

Consumer prices (index, 1982–84=100)	
	 Food	

December	
December	

Two years
ago

Production or stocks
	 Corn stocks (mil. bu.)	
	 Soybean stocks (mil. bu.)	
	 Wheat stocks (mil. bu.)	
	 Beef production (bil. lb.)	
	 Pork production (bil. lb.)	
	 Milk production (bil. lb.)*	

December 1	
December 1	
December 1	
December	
December	
December	

10,084	
2,276	
1,422	
2.08	
2.05	
14.6	

N.A.	
N.A.	
N.A.	
6.2	
8.7	
4.3	

–  	
2
–  	
4
26	
1	
4	
1	

13	
–  6	
1
8	
2	
14	
4

Agricultural exports ($ mil.)	
	 Corn (mil. bu.)	
	 Soybeans (mil. bu.)	
	 Wheat (mil. bu.)	

December	
December	
December	
November	

8,183	
129	
171	
77	

–  2.2	
1
–  0.5	
1
–  .6	
1
–  9.7	
1

–  1	
1
–  6	
3
17	
–  6	
3

23	
–  0
3
39	
24

January	
January	
January	
January	

5,137	
3,101	
2,036	
509	

–  5.9	
3
–  7.7	
3
–  2.9	
3
–  6.0	
4

–  	
8
–  5	
1
5	
13	

 

 
 

–  7	
1
–  3	
3
31
26	

Farm machinery (units)
	 Tractors, over 40 HP	
		 40 to 100 HP	
		 100 HP or more	
	 Combines	

 
 
 

	

N.A. Not applicable.
*23 selected states.
Sources: Author's calculations based on data from the U.S. Department of Agriculture, U.S. Bureau of Labor Statistics, and the Association of Equipment Manufacturers.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102