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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago

AgLetter

Number 1947	

FARMLAND VALUES AND CREDIT CONDITIONS

smallest change in a decade (see chart 1 on next page).
Still, this small annual increase, registered for the final quarter of 2009, was better than the year-over-year comparisons
for each of the three previous quarters. Not all District states
contributed to the increase in farmland values for 2009:
Michigan and Wisconsin farmland values fell 6 percent and
1 percent for the year, respectively (see table and map below). At the other end of the spectrum, Indiana and Iowa
had higher annual increases in farmland values than the
District average. The annual gain for Illinois matched the
District average.

Summary
The annual change in farmland values was positive at 2 percent in 2009 for the Seventh Federal Reserve District, though
2009's first three quarters had negative year-over-year comparisons. The quarterly increase in the value of "good" agricultural land was 2 percent as well, based on 214 surveys
from agricultural bankers. Over 80 percent of respondents
expected farmland values to stay unchanged from January
through March of 2010 in their respective areas.
The Seventh District's agricultural credit conditions
were mixed in the fourth quarter of 2009 because of greater
financial stress relative to a year ago. Non-real-estate loan
demand was almost the same in October through December
of 2009 compared with the same period of the previous
year. Funds availability also improved again in the fourth
quarter of 2009. However, farm loan repayment rates in
the final quarter of 2009 were below the level of a year ago,
and rates of loan renewals and extensions were higher
than a year earlier. Agricultural interest rates remained
low. Averaging 75.4 percent, loan-to-deposit ratios were
essentially the same as in the third quarter of 2009.

February 2010

District land values rose 2 percent from the third
quarter to the fourth quarter of 2009, reflecting higher
agricultural prices in the final three months of the year.
Michigan had a quarterly decrease in land values, diverging from the other states in the District.
Adjusted for inflation, annual farmland values increased only 1 percent in 2009 for the District—the same
as in 2008. Even though the annual index of nominal farmland values had more than doubled by the end of 2009
from its 1981 peak (see chart 2 on next page), the index
of inflation-adjusted farmland values only approached
the level of 1981. The compound annual growth rate in
farmland values (adjusted for inflation) was 1.8 percent
from 1970 through 2009. So, 2009's gain in land values
was below the pace seen over the past four decades.

Farmland values
With a 2 percent annual increase for 2009 in the value of
"good" agricultural land, the District experienced its
Percent change in dollar value of “good” farmland
Top:
October 1, 2009 to January 1, 2010
Bottom: January 1, 2009 to January 1, 2010
	
	
	

Illinois	
Indiana	
Iowa	
Michigan 	
Wisconsin	
Seventh District	

October 1, 2009	
to	
January 1, 2010	

+  	
2
+  	
3
+  	
3
–   	
2
+  	
1
+  	
2

XII

VI
+7
+2

January 1, 2009	
to
January 1, 2010

+ 
2
+ 
7
+ 
4
– 
6
– 
1
+2

I
+4
+4

+4
+5

II
+3
+1

+2
III +4

VII
–7
–3

IV

XIV

*

X
0
0 VIII

V

+1
+1

*Insufficient response.

*

*

IX
+3
+4

+5
+5

XV

XI
+3
+3

XVI

+1
+8

1. Annual percentage change in Seventh District farmland values
percent
30
20
10
0
–10
–20
–30
1973

’76

’79

’82

’85

’88

’91

’94

’97

2000

’03

’06

’09

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

Midwest agriculture experienced a challenging 2009,
especially with a long, difficult harvest and losses on livestock throughout most of the year. Still, the majority of the
farm sector rallied toward the end of 2009. A record-setting
U.S. harvest produced 13.2 billion bushels of corn and
3.36 billion bushels of soybeans, based on U.S. Department
of Agriculture (USDA) estimates. District production of corn
increased 5 percent from 2008 and set a new record for yield.
Soybean output was up 6 percent from 2008 in the District.
Cash corn prices rose to $3.59 per bushel in December 2009,
7.2 percent higher than in December 2008. Cash soybean
prices increased to $10.13 per bushel in December 2009,
20 percent above prices a year prior. Both milk and hog
prices had risen above year-ago levels by the end of 2009.
Net farm income in 2009 fell 35 percent from 2008,
to $56.4 billion, according to the latest estimates by the
USDA. Yet the agricultural sector had some financial cushion
after a run of six years that averaged $73.9 billion in net
farm income per year. Out of the previous 50 years only
three resulted in a higher level of net farm income (adjusted
for inflation). Respondents reported that some larger-thanaverage farm operations looked to expand, even in 2009,
because of their strong balance sheets and available cash.
One motive mentioned was to add family partners to the
operation. Also, a higher premium for better quality farmland helped keep values above the level of 2008.
The value of crop production in the U.S. declined
9.1 percent in 2009, to $166 billion, from its 2008 level,
according to USDA data. The USDA predicted that the value
of crop production would slip again to $162 billion in
2010. The value of livestock production was forecasted to
increase to $130 billion in 2010 from $118 billion in 2009—
a 10 percent jump. If this forecast proves to be correct, it
would be quite a reversal because in 2009 the value of livestock production fell 16 percent from its 2008 level. Direct

government payments to agriculture; input costs; and payments to laborers, creditors, and landlords are all anticipated
to be about the same in 2010 as in 2009. Given these forecasts, the USDA predicted net farm income to rise from
$56.4 billion in 2009 to $63.0 billion in 2010. Even so, over
80 percent of the responding District bankers anticipated
farmland values to be unchanged from January through
March of 2010, while 6 percent anticipated values to increase and 10 percent anticipated values to decrease.

Credit conditions
There was improvement in the District's credit conditions
for the fourth quarter of 2009 compared with the third quarter of 2009, though not when compared with the fourth
quarter of 2008. Demand for non-real-estate loans during
the last three months of 2009 was essentially the same as a
year ago, recovering more from a lull in the middle of the
year. The index of loan demand was 102, with 28 percent of
responding bankers noting an increase in the demand for
non-real-estate loans and 26 percent noting a decrease.
A higher rate of renewals and extensions of loans in
the fourth quarter of 2009 compared with the fourth quarter of the previous year reflected the stresses on livestock
operations, as did lower loan repayment rates. Respondents reported higher rates of renewals and extensions
(22 percent) rather than lower rates (9 percent) for the
fourth quarter of 2009 than for the same quarter of 2008.
In Wisconsin, half of the bankers indicated loan renewals
and extensions in the fourth quarter of 2009 were higher
than in the prior year, as dairy losses continued to mount.
Repayment rates deteriorated in the fourth quarter
of 2009 compared with a year ago, although the index edged
up from the third quarter of 2009. The index of non-realestate farm loan repayment rates was 92 in the final quarter
of 2009, with 13 percent of the bankers reporting higher
2. Indexes of Seventh District farmland values
index, 1981=100
250
200

Nominal
farmland values

150

Farmland values
adjusted by PCE

100
50
0
1973

’76

’79

’82

’85

’88

’91

’94

’97

2000

’03

’06

’09

Sources: Author's calculations based on data from Federal Reserve
Bank of Chicago farmland value surveys; and U.S. Bureau of Economic
Analysis, Personal Consumption Expenditures (PCE) Price Index, from
Haver Analytics.

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

		
2008
Jan–Mar	
Apr–June	
July–Sept	
Oct–Dec	
2009
Jan–Mar	
Apr–June	
July–Sept	
Oct–Dec	

(index)b	

(index)b	

(index)b	

(percent)	

(percent)	

(percent)	

(percent)

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

116	
88	
95	
102	

112	
118	
121	
125	

105	
93	
89	
92	

76.2	
77.3	
75.3	
75.4	

6.20	
6.18	
6.17	
6.23	

6.31	
6.36	
6.35	
6.40	

6.14
6.16
6.13
6.13

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 percentage of bankers that responded “lower” from the percentage 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/webpages/publications/agletter/index.cfm.

a

b

rates of loan repayment and 21 percent reporting lower
rates. Repayment rates weakened in all District states except Iowa. Wisconsin was particularly challenged, with
over half of the respondents noting lower repayment rates.
Over 8 percent of the volume of Wisconsin banks' agricultural loan portfolios was classified as having major or severe
repayment problems, versus 4 percent for the District. Both
of these numbers were under 3 percent at the end of 2008.
The availability of funds grew during the October
through December period of 2009 relative to the same
period of 2008. The index of funds availability climbed
to 125, since 30 percent of the responding bankers had
more funds available to lend and 5 percent had fewer.
However, the amount of collateral required for loans increased in the fourth quarter of 2009 at 25 percent of the
banks. Tighter credit standards for agricultural loans relative to the fourth quarter of 2008 were instituted at 44 percent of the reporting banks in 2009. Almost 4 percent of
District customers with operating credit would probably
not receive new credit lines in 2010; Wisconsin, at 11 percent, faced the highest level of troubled operating credit.
Interest rates on agricultural loans remained at low
levels in the fourth quarter of 2009. Though operating loan
rates edged up, mortgage rates were unchanged from
three months earlier. As of January 1, 2010, the District
averages for interest rates were 6.23 percent on new operating loans and 6.13 percent on farm real estate loans.

Looking forward
Respondents expected to make about the same volumes
of non-real-estate loans in the first quarter of 2010 as they
made in the first quarter of 2009. Lower volumes were predicted for feeder cattle, dairy, farm machinery, and grain
storage construction loans; higher volumes were predicted
for operating loans and loans guaranteed by the Farm
Service Agency. Responding bankers anticipated farm real

estate loan volumes to lessen during January, February,
and March of 2010 relative to the same months of 2009.
Capital expenditures by farmers in 2010 were expected to be lower than in 2009. Thirteen percent of the
respondents anticipated increased spending in 2010 on
land purchases or improvements, while 37 percent anticipated reduced spending. For buildings and facilities,
17 percent predicted higher spending and 42 percent
predicted lower spending. With 19 percent of respondents
anticipating higher purchases and 36 percent anticipating
lower purchases, the prospects for sales of machinery and
equipment were not much better. Expenditures on trucks
and autos were forecasted to decline as well, with 19 percent more of the respondents expecting lower rather than
higher spending by farmers. Reduced investments in capital goods for farming would support the view that agriculture will continue to face challenges throughout 2010.
David B. Oppedahl, business economist

AgLetter (ISSN 1080-8639) is published quarterly by the
Economic Research Department of the Federal Reserve Bank
of Chicago. It is prepared by David B. Oppedahl, business
economist, and members of the Bank’s Economic 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 or the Federal
Reserve System.
© 2010 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	

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)	
		 Barrows & gilts ($ per cwt.)	
		 Steers & heifers ($ per cwt.)	
		 Milk ($ per cwt.)	
		 Eggs ($ per doz.)	

January	
January	
January	
January	
January	
January	
January	
January	
January	
January	
January	

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

December	
December	

Prior	
period	

Year	
ago	

Two years
ago

137	
148	
3.45	
109	
9.49	
4.79	
123	
47.80	
87.00	
16.50	
1.03	

1.5	
0.0	
– 3.9	
1.9	
– 3.2	
– 1.2	
3.4	
5.1	
3.8	
0.0	
– 1.9	

– 1	
–1	
– 21	
– 19	
– 5	
– 23	
8	
12	
1	
24	
0	

– 6
– 7
– 13
– 13
– 5
– 40
– 5
25
– 7
– 20
– 20	

218	
218	

0.1	
0.2	

3	
– 1	

3
5

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	

10,934	
2,337	
1,765	
2.13	
1.99	
14.6	

N.A.	
N.A.	
N.A.	
5.9	
3.3	
4.3	

9	
3	
24	
2	
– 3	
– 1	

6
– 1
56
4
1
1	

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

November	
November	
November	
November	

10,685	
131	
294	
68	

13.5	
– 4.6	
50.1	
– 12.2	

15	
– 9	
70	
– 12	

12
– 49
131
– 44	

Farm machinery (units) 				
	 Tractors, over 40 HP	
January	
5,446	
N.A.	
		 40 to 100 HP	
January	
2,811	
N.A.	
		 100 HP or more	
January	
2,635	
N.A.	
	 Combines	
January	
581	
N.A.	

7	
– 8	
30	
14	

– 3
– 23
36
29

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