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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago

AgLetter

Number 1963	

FARMLAND VALUES AND CREDIT CONDITIONS

ago. Agricultural interest rates continued to inch up in
the fourth quarter of 2013.

Summary
In 2013, the Seventh Federal Reserve District had an annual
increase of 5 percent in “good” farmland values, yet growth
in farmland values appeared to be slowing. Some areas in
the District even saw declines in farmland values, as corn
and soybean prices tumbled from a year ago. According
to survey respondents from 186 agricultural banks across
the District, agricultural land values rose 3 percent from
the third quarter to the fourth quarter of 2013. A majority
of respondents anticipated farmland values to remain stable
during the January through March period of 2014, but
the rest of the respondents’ expectations tilted toward
decreases in farmland values during this period.

February 2014

Farmland values
The District’s annual increase of 5 percent in “good” farmland values for 2013 was the smallest gain since 2009 and
the second-lowest gain of the past decade (see chart 1 on next
page). Moreover, the 5 percent year-over-year increase in
farmland values in the fourth quarter of 2013 was the smallest for the District since the first quarter of 2010. The index
of inflation-adjusted agricultural land values set a new highwater mark for the District, not quite doubling its 1979 peak
from the 1970s boom (see chart 2 on next page). In the fourth
quarter of 2013, Illinois, Indiana, and Michigan experienced
year-over-year gains in agricultural land values exceeding
that for the District; in contrast, Wisconsin had a year-overyear increase that was smaller than the District’s, and Iowa
actually saw lower values for agricultural land than a year
earlier (see table and map below).

Agricultural credit conditions weakened in the fourth
quarter of 2013 compared with the fourth quarter of 2012.
Repayment rates on non-real-estate farm loans were lower
in the October through December period of 2013 versus
the same period of 2012, and rates of loan renewals and
extensions were higher. In the fourth quarter of 2013, nonreal-estate loan demand picked up from a year ago—which
last occurred in the fourth quarter of 2010, as farmers had
relatively more working capital during the intervening quarters. Funds available for lending remained above the level
of a year ago. At 67.3 percent, the average loan-to-deposit
ratio for reporting banks was just above the level of a year

Overall, the District’s crop production bounced back
strongly from the 2012 drought, but drought returned to
the Midwest in 2013, hitting Iowa the hardest among
District states. According to U.S. Department of Agriculture
(USDA) data, the District’s corn yield surged 42 percent
in 2013 from 2012—to 169 bushels per acre (its third-highest level on record). Also, the District’s soybean yield moved
up 7.5 percent in 2013 from 2012—to 46.9 bushels per acre.

Percent change in dollar value of “good” farmland
Top:
October 1, 2013 to January 1, 2014
Bottom: January 1, 2013 to January 1, 2014
	
	
	

October 1, 2013	
January 1, 2013
to	to
January 1, 2014	
January 1, 2014

Illinois	
+3	+10
Indiana	
+6	
+ 14
Iowa	
– 1	
– 2
Michigan 	
*	+6
Wisconsin	
– 1	
+2
Seventh District	+3	
+5

VI
–  4
– 
1
I

– 
2
– 
2

0
III +2

0

VII
XIV

*

X
+2
+9 VIII

V

+3
–   4

*Insufficient response.

*
+2
+8

–  IV
1

II
–  4
– 
7

XII

*

IX
+2
+16

XV

*

XI
+4
+8

XVI
*

1. Annual percentage change in Seventh District farmland values
percent
30

20
10
0
−10
−20
−30
1971

’77

’83

’89

’95

2001

’07

’13

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

The District’s 2013 production increased 36 percent for
corn and 8.4 percent for soybeans relative to 2012 levels.
However, a second straight year of drought limited Iowa’s
output: Iowa’s corn production in 2013 was just 15 percent
higher than in 2012 (while Illinois’s corn production was
63 percent higher and Indiana’s was 74 percent higher).
Additionally, Iowa’s soybean production in 2013 was
actually 0.8 percent lower than in 2012.
The rebound in agricultural production for the United
States in 2013 led to the largest corn crop and the thirdlargest soybean crop on record, according to the USDA.
The resurgence in the supply of farm products contributed
to declines in crop prices. Corn, soybean, and wheat prices
for the fourth quarter of 2013 were lower, on average, by
35 percent, 11 percent, and 18 percent, respectively, than
their prices of a year ago. Milk prices eased 0.3 percent in
the October through December period of 2013 relative to
the same period of a year ago, but hog and cattle prices
gained 4.4 percent and 2.3 percent, respectively. (These
figures were computed from USDA price data.) These price
movements improved the footing of livestock producers,
as feeding costs waned in 2013.
For 2012, $7.68 billion in crop insurance indemnities
were paid out among the District’s five states—44 percent
of the U.S. total of $17.4 billion. As of late January 2014,
$2.22 billion had been paid out for insured 2013 agricultural losses in the five states of the District (23 percent of
the U.S. total of $9.60 billion in crop insurance indemnities).
In addition, the distribution of the indemnities changed
over the past two years. Illinois bore the brunt of the 2012
drought; 46 percent of the District states’ insured agricultural losses were in Illinois (26 percent of them were in
Iowa). In 2013, 61 percent of the District states’ insured
agricultural losses were in Iowa. (These figures were computed from data provided by the USDA’s Risk Management
Agency.) So, Iowa farmland values ended down for 2013
as the state suffered drought for the second straight year

against a backdrop of substantially lower crop prices
relative to a year ago. In contrast, Illinois and Indiana
farmland values continued to march upward as crop
yields bounced back from the drought relatively more
strongly than the declines in crop prices.

Credit conditions
Agricultural credit conditions deteriorated in the fourth
quarter of 2013 relative to the fourth quarter of 2012 in
the District, especially in Iowa and Wisconsin. The index
of non-real-estate farm loan repayment rates weakened
in the fourth quarter of 2013, moving below 100 for the
first time since 2010. The index of repayment rates was 91
for the final quarter of 2013, with 12 percent of survey respondents reporting higher rates of loan repayment compared with the fourth quarter of 2012 and 21 percent
reporting lower rates. Notably, Iowa and Wisconsin were
the only District states to have lower rates of loan repayment in the final quarter of 2013 compared with a year ago.
Sixteen percent of survey respondents reported higher rates
of renewals and extensions during the October through
December period of 2013 versus the same period of the
prior year, while 9 percent reported lower rates. The shift
toward more renewals and extensions of loans was limited to Iowa and Wisconsin. Credit quality for the District
faltered, as 2.4 percent, on average, of the volume of the
farm loan portfolio was reported as having major or severe
repayment problems in the fourth quarter of 2013 (the
share of loans with such problems in Iowa’s farm loan
portfolio was reported to be larger).
In the final quarter of 2013, demand for non-realestate farm loans was higher than a year ago (which last
happened in the final quarter of 2010). The index of loan
demand jumped to 120 for the fourth quarter of 2013, with
39 percent of survey respondents noting an increase in the
demand for non-real-estate loans from a year earlier and
19 percent noting a decrease. This reading marked the
highest level for the index of loan demand since the second
2. Indexes of Seventh District farmland values
index, 1981=100
500
400
Nominal
farmland values

300
200

Farmland values
adjusted by PCEPI

100
0
1971

’77

’83

’89

’95

2001

’07

’13

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 Price Index (PCEPI), 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

		
2012
	Jan–Mar	
	Apr–June	
July–Sept	
	Oct–Dec	
2013
	Jan–Mar	
	Apr–June	
	July–Sept	
	 Oct–Dec 	

(index)b	(index)b	(index)b	

(percent)	

(percent)	 (percent)	(percent)

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

67	
87	
91	
120	

161	
142	
128	
121	

143	
129	
115	
91	

63.7	
64.6	
66.9	
67.3	

4.91	
4.94	
4.94	
4.99	

5.12	
5.16	
5.14	
5.10	

4.60
4.65
4.68
4.94

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.

a

b

quarter of 2007. The index of funds availability was down
to 121, as 25 percent of the responding bankers indicated
that their banks had more funds available than a year ago
and 4 percent indicated their banks had fewer. This was
the lowest reading of the index of funds availability since
the third quarter of 2009. Additionally, at 67.3 percent, the
average loan-to-deposit ratio for reporting banks edged up
from the level of a year ago, but stood at about 10 percent
below the average level desired by survey respondents.
Twenty-seven percent of the reporting banks tightened their credit standards for agricultural loans in the
fourth quarter of 2013 relative to the fourth quarter of 2012,
and just 1 percent eased their credit standards; thus, credit
availability was somewhat more restricted than a year
earlier. Moreover, 6 percent of reporting banks required
larger amounts of collateral to qualify for non-real-estate
farm loans during the October through December period
of 2013 relative to the same period of a year earlier, and
1 percent required smaller amounts.
As of January 1, 2014, the average interest rate for farm
operating loans edged up to 4.99 percent. Similarly, the
average interest rate for agricultural real estate loans rose
to 4.94 percent. The farm operating loan interest rate was
still below its level of a year ago, whereas the farm real
estate interest rate had matched its level of the second
quarter of 2012.

Looking forward
According to survey respondents, over 1 percent of their
farm customers with operating credit in 2013 were not likely
to qualify for new operating credit in 2014. In Wisconsin,
over 3 percent were unlikely to qualify again. Survey respondents anticipated non-real-estate agricultural loan volumes
(in particular, the volume of operating loans but also those
of feeder cattle loans and loans guaranteed by the Farm
Service Agency) to be higher in the first quarter of 2014
than in the same quarter of 2013. In contrast, responding
bankers expected grain storage and farm machinery loan

volumes, as well as the volume of farm real estate loans,
to be lower in the January through March period of 2014
than in the same period of a year ago.
In a major reversal from a year ago, farmers’ capital
expenditures—specifically, expenditures on land or improvements, buildings and facilities, machinery and equipment,
and trucks and autos—were expected by survey respondents
to be lower in the year ahead. Over half of the responding
bankers forecasted lower levels of capital purchases in
each of these categories in 2014 than in 2013, and less than
10 percent forecasted higher levels. Fifty-six percent of
the responding bankers anticipated farmland values to
be stable from January through March of 2014; 41 percent
anticipated them to be lower; and just 3 percent anticipated
them to be higher. Combined with expectations of diminished farmland purchases by farmers in 2014, these survey responses cast a pall over the spectacular growth in
agricultural land values of the past few years.
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.
© 2014 Federal Reserve Bank of Chicago
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provided the articles are not reproduced or distributed for
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email Helen.Koshy@chi.frb.org. AgLetter and other Bank
publications are available at www.chicagofed.org.

SELECTED AGRICULTURAL ECONOMIC INDICATORS
	
	
	
	

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	

Percent change from
Latest		
Prior	
Year	
Two years
period	
Value	 period	ago	 ago
January	
180	
– 2.2	
– 17	
– 5
January	
186	
– 3.1	
– 26	
– 13
January	
4.37	
– 0.9	
– 37	
– 28
January	
165	
– 1.8	
– 12	
– 4
January	
13.00	
0.0	
– 9	
9
January	
6.31	
– 6.2	
– 22	
– 10
January	
172	
– 0.6	
4	
11
January	
60.90	
– 0.7	
– 5	
– 4
January	
137.00	 3.8	5	5
January	 23.20	 5.5	17	23
January	
1.10	
– 19.1	
4	
25
December	 235	 0.3	2	3
December	 238	 0.0	1	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.)*	

December 1	
10,426	
N.A.	
30	
8
December 1	
2,148	
N.A.	
9	
– 9
December 1	
1,463	
N.A.	
– 12	
– 12
December	
2.05	
– 0.5	
1	
– 4
December	 2.07	 1.3	6	0
December	 15.7	 5.4	0	2

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

December	
14,372	 – 
8.4	11	22
December	
143	
3.2	
165	
– 18
December	 259	 19.4	37	75
– 
December	 75	 18.2	19	 3

Farm machinery (units) 							
	 Tractors, 40 HP or more	
December	
11,370	 N.A.	10	21
		 40 to 100 HP	
December	 6,189	 N.A.	 9	11
		 100 HP or more	
December	 5,181	 N.A.	12	36
	Combines	
December	 1,279	 N.A.	39	36
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