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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1962

November 2013

AgLetter
lower compared with a year ago. These last two factors
contributed to the average loan-to-deposit ratio for the
District (66.9 percent) being lower than what had been
recorded a year earlier. The average interest rate on farm
operating loans was unchanged in the third quarter of
2013, while the average interest rate on farm real estate
loans edged up.

FARMLAND VALUES AND CREDIT CONDITIONS
Summary
On a year-over-year basis, farmland values in the Seventh
Federal Reserve District gained 14 percent in the third
quarter of 2013. However, the return of drought seemed
to temper the year-over-year gain in Iowa farmland values.
There was a 1 percent increase in “good” agricultural land
values in the third quarter relative to the second quarter
of 2013, according to the 195 agricultural bankers that provided responses for the October 1 survey. While District
farmland values increased on the whole in the third quarter of 2013, this upward trend was not expected to continue:
The respondents’ expectations leaned toward a decrease
in farmland values in the fourth quarter of 2013, as only
4 percent anticipated an increase and 21 percent forecasted
a decrease (75 percent foresaw stable farmland values).

Farmland values
The momentum of rising farmland values in the District
was carried into the third quarter of 2013, as evidenced
by a year-over-year increase of 14 percent. On a quarterly
basis, the District’s agricultural land values saw a gain of
1 percent in the third quarter of 2013 after recording no
increase in the previous quarter. After leading the District
in terms of year-over-year gains in farmland values from
the first quarter of 2010 until earlier this year, Iowa felt
the impact of renewed drought conditions and had the
lowest year-over-year increase in agricultural land values
among District states, as well as the only quarterly decrease
(see map and table below).

In the third quarter of 2013, agricultural credit conditions, by and large, saw improvement from a year ago.
But this improvement narrowed from those seen in recent
quarters for the District. There was less financial stress, as
repayment rates for non-real-estate farm loans were higher
and as loan renewals and extensions were lower in the
third quarter of 2013 relative to the same quarter last year.
Moreover, funds availability was higher than in the third
quarter of 2012. And demand for non-real-estate loans was

The District’s quarterly uptick in farmland values
occurred in spite of a significant downturn in corn and
soybean prices. According to the U.S. Department of
Agriculture (USDA), corn prices averaged $6.13 per bushel
in the third quarter of 2013—down 12 percent from the

Percent change in dollar value of “good” farmland
XII

Top:
July 1, 2013 to October 1, 2013
Bottom: October 1, 2012 to October 1, 2013
July 1, 2013
to
October 1, 2013

Illinois
Indiana
Iowa
Michigan
Wisconsin
Seventh District

+1
+2
–1
+5
+2
+1

October 1, 2012
to
October 1, 2013

+16
+ 18
+9
+17
+14
+14

VI
+1
+15

I

II

–1

+4
+3

+4

–1
III +17

–2
+11

VII
+4
+11

IV

XIV

*
X
0
+16 VIII

V
–4
+16

*Insufficient response.

*

*
XV

IX
+3
+26

–2
+13

XI
+1
+13

XVI

+4
+21

the third quarter of 2013. Collateral requirements for loans
tightened in the third quarter of 2013 relative to the third
quarter of the previous year, as 7 percent of the survey respondents reported that their banks required more collateral and 1 percent reported that their banks required less.

1. Corn and soybean production for Seventh District states
billions of bushels
8

6

Corn
4

2

Soybeans
0
1965

’73

’81

’89

’97

2005

’13

Source: Author’s calculations based on data from the U.S. Department of
Agriculture, National Agricultural Statistics Service.

previous quarter and down 15 percent from a year ago.
At $14.23 per bushel in the third quarter of 2013, the average price for soybeans dropped 3.8 percent from the previous quarter and was off 7.0 percent from a year ago. The
USDA predicted that the five District states’ harvest of
corn for grain would be 38 percent greater than the droughtreduced harvest of 2012. For the five District states, soybean
production was projected by the USDA to rise 8.5 percent
in 2013 from its 2012 level. Even with the reoccurrence of
drought in parts of the District, the third-largest corn harvest and a soybean harvest just outside the top ten filled
storage bins across the Midwest (see chart 1). Better-thanexpected crop yields for the District may have contributed
to the momentum of its rising farmland values; however,
in areas affected by back-to-back droughts, the loss of
revenue from declines in crop prices and yields may have
constrained farmland value gains.

Credit conditions
In the third quarter of 2013, the District’s agricultural credit
conditions saw improvement relative to a year ago, although
it was generally narrower than in the previous quarters of
this year and the past few years. Compared with a year
ago, repayment rates on non-real-estate farm loans were
higher in the July through September period of 2013. Yet,
the index of loan repayment rates dropped to 115 in the
third quarter of 2013, as 23 percent of the responding bankers
reported higher rates of loan repayment relative to a year
ago and 8 percent reported lower rates. In addition, loan
renewals and extensions on non-real-estate agricultural
loans were lower this past quarter relative to the third
quarter of 2012, with 8 percent of the responding bankers
observing more of them and 13 percent observing fewer.
The index of funds availability fell to 128, with 34 percent
of the respondents indicating there were more funds available at their banks during the third quarter of 2013 than a
year earlier and 6 percent indicating there were fewer. The
indexes of loan repayment rates and funds availability had
not been as low during the past three years as they were in

Demand for non-real-estate loans compared with a
year ago was lower in the third quarter of 2013. Given
that 20 percent of survey respondents observed higher
demand for non-real-estate loans than a year earlier and
29 percent observed lower demand, the index of loan
demand stood at 91—up slightly from 87 in the second
quarter (see chart 2). Somewhat lower than a year ago, the
District’s average loan-to-deposit ratio was 66.9 percent—
about 11 percentage points below the level desired by the
responding bankers. As of October 1, 2013, the average interest rate on agricultural operating loans was 4.94 percent
(the same as it had been on July 1, 2013), but the average interest rate on farm real estate loans edged up to
4.68 percent.

Looking forward
The third quarter’s results were fairly similar to those of
previous quarters, but the survey respondents predicted
some stark differences for the coming months. The respondents’ expectations tended to indicate a reversal of fortunes
for farmland values; indeed, only 4 percent of the respondents anticipated higher farmland values in the October
through December period of 2013, while 21 percent forecasted lower farmland values. Still, the vast majority
(75 percent) expected no change in farmland values for
the fourth quarter of 2013. Moreover, survey respondents
predicted farmers’ demand to acquire farmland this fall
and winter to be stronger than a year ago, whereas they
expected the opposite for nonfarm investors’ demand.
Thirty-six percent of the responding bankers predicted
a decrease in the volume of farmland transfers relative to
the fall and winter of a year ago, while 18 percent expected
an increase.
2. Non-real-estate farm loan demand for Seventh District
index
150

125

100

75

50
1991

’93

’95

’97

’99

2001

’03

’05

’07

’09

’11

’13

Notes: The dashed line including the final data point on this chart is a projection
based on survey results. All other data are historical survey data.
Source: Author’s calculations based on data from Federal Reserve Bank of Chicago
farmland value surveys.

Credit conditions at Seventh District agricultural banks
Interest rates on farm loans
Loan
demand

Funds
availability

Loan
repayment rates

Average loan-todeposit ratio

Operating
loansa

Feeder
cattlea

Real
estatea

(index)b

(index)b

(index)b

(percent)

(percent)

(percent)

(percent)

2011
Jan–Mar
Apr–June
July–Sept
Oct–Dec

81
79
81
87

149
145
149
153

146
133
133
150

69.8
70.3
69.0
68.7

6.01
5.75
5.66
5.47

5.93
5.91
5.79
5.65

5.80
5.62
5.36
5.20

2012
Jan–Mar
Apr–June
July–Sept
Oct–Dec

72
69
81
96

163
164
147
151

154
139
128
135

66.5
68.1
67.5
67.2

5.34
5.27
5.21
5.03

5.54
5.41
5.37
5.24

5.08
4.94
4.86
4.70

2013
Jan–Mar
Apr–June
July–Sept

67
87
91

161
142
128

143
129
115

63.7
64.6
66.9

4.91
4.94
4.94

5.12
5.16
5.14

4.60
4.65
4.68

a

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 who responded “lower” from the percentage who 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.

b

Net cash farm earnings for crop and livestock operations were expected to move in opposite directions. Crop
farmers faced the prospects of lower levels of net cash
earnings this fall and winter relative to the previous fall and
winter, as only 12 percent of survey respondents anticipated net cash earnings from crops to rise and 73 percent
expected them to drop. Given the recent steep declines
in crop prices, the USDA estimated price intervals of
$4.10 to $4.90 per bushel for corn and $11.15 to $13.15 per
bushel for soybeans in the 2013–14 crop year. Reduced
feed costs have been a boon for hog, cattle, and dairy
farmers. Thirty-seven percent of the respondents expected
higher net earnings for cattle and hog operations over
the next three to six months relative to a year ago, while
26 percent predicted lower net earnings. In October 2013,
cattle and hog prices were 0.8 percent and 11 percent
higher than a year ago, respectively. The prospects for
dairy producers were not as rosy, since milk prices were
off 6 percent from October 2012. Fifteen percent of respondents expected higher net earnings for dairy operations
over the fall and winter compared with a year ago, and
26 percent forecasted lower net earnings.
Furthermore, heading into the fall and winter, survey respondents sensed a shift in agricultural credit conditions. Loan repayment was anticipated to worsen, with
17 percent of the responding bankers predicting the volume of farm loan repayments to rise in the next three to
six months relative to a year ago and 26 percent expecting
this volume to fall. According to bankers participating in
the survey, forced sales or liquidations of farm assets
among financially stressed farmers should decline in the
next three to six months relative to a year earlier, except
in Wisconsin.

Finally, there were more survey respondents predicting an increase versus a decrease in non-real-estate
loan volume for the October through December period of
2013 relative to the same period of 2012. If these predictions
were to come about, the index of non-real-estate loan demand would hit its highest level since 2007 (see chart 2).
All the predicted strength stemmed from a higher volume
of operating loans in the fourth quarter of 2013 compared
with a year earlier—which was forecasted by 44 percent
of the respondents (10 percent expected a lower volume).
The volume of farm real estate loans was anticipated to
decline in the fourth quarter of 2013 relative to the fourth
quarter of 2012, as 14 percent of the respondents forecasted an increase and 23 percent predicted a decrease.
David B. Oppedahl, senior 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, senior
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.
© 2013 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
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.)
Consumer prices (index, 1982–84=100)
Food

Value

October
October
October
October
October
October
October
October
October
October
October

187
203
4.49
177
12.60
7.09
163
69.40
128.00
20.30
1.04

September
September

Prior
period

Year
ago

Two years
ago

0.5
– 1.5
– 16.9
0.6
– 5.3
4.3
0.0
– 1.7
0.8
1.0
0.0

– 11
– 15
– 34
–7
– 11
– 15
1
11
1
–6
2

1
0
– 22
–4
7
–2
7
1
5
2
2

234
238

0.2
0.0

1
1

3
3

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.)*

September 1
September 1
September 1
September
September
September

824
141
1,855
2.07
1.84
14.8

N.A.
N.A.
N.A.
– 7.5
– 4.9
– 5.7

– 17
– 17
– 12
3
–4
1

– 27
– 34
– 14
–6
–6
1

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

August
August
August
August

10,255
46
17
141

1.4
– 19.3
26.9
24.0

–5
– 44
– 77
45

–6
– 70
– 61
41

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

September
September
September
September

7,937
4,434
3,503
1,028

N.A.
N.A.
N.A.
N.A.

7
9
4
– 24

11
10
13
– 18

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