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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago

AgLetter

Number 1968	

May 2015

FARMLAND VALUES AND CREDIT CONDITIONS

SAVE THE DATE

Summary
For the first quarter of 2015, farmland values in the Seventh
Federal Reserve District were unchanged from a year
ago, but this result masked substantial variation among
District states. There was an increase of 1 percent in “good”
farmland values in the first quarter of 2015 relative to the
fourth quarter of 2014, based on the survey responses of
234 District agricultural bankers. Strikingly, cash rental
rates for District agricultural land were down 8 percent
for 2015 compared with 2014. This decline provided some
relief in rental costs for farmers facing much lower crop
prices than in recent years. Demand to purchase farmland
was weaker in the three- to six-month period ending with
March 2015 compared with the same period ending with
March 2014. Moreover, the amount of farmland for sale,
the number of farms sold, and the amount of acreage sold
were all lower during the winter and early spring of 2015
compared with a year ago. Just over half of the responding
bankers expected farmland values to be stable during the
second quarter of 2015, but nearly all of the rest expected
farmland values to head lower.

On November 17, 2015, the Federal Reserve Bank of
Chicago will hold a conference to explore labor issues
affecting agriculture and the rural Midwest. Additional
information about the conference will be released in the
coming months on https://www.chicagofed.org.

rates for non-real-estate farm loans were much weaker than
a year ago. Also, there were much higher levels of renewals
and extensions of these loans than a year earlier. The average
loan-to-deposit ratio edged down to 69 percent. Average
interest rates on farm loans moved down in the first quarter of 2015, setting new record lows.

Farmland values
Agricultural land values in the District managed to gain
1 percent in the first quarter of 2015 relative to the fourth
quarter of 2014. There was no year-over-year change in
farmland values for the District as a whole in the first
quarter of 2015—in contrast to the slight decrease at the
end of 2014. However, after adjusting for inflation using
the Personal Consumption Expenditures Price Index (PCEPI),
there was indeed a year-over-year decrease of 1 percent
for District farmland values in the first quarter of 2015.

Agricultural credit conditions continued to be mixed
for the District. In the first quarter of 2015, demand for nonreal-estate loans was once again much stronger than a year
ago. The availability of funds to lend still showed a small
improvement compared with a year earlier, but repayment

Even though there was no year-over-year change in
farmland values for the District and all states had improved
results, there were some key differences among the states

Percent change in dollar value of “good” farmland
Top:
January 1, 2015 to April 1, 2015
Bottom: April 1, 2014 to April 1, 2015
	
	
	

Illinois	
Indiana	
Iowa	
Michigan 	
Wisconsin	
Seventh District	

VI
0
+ 4

January 1, 2015	
April 1, 2014
to	to
April 1, 2015	
April 1, 2015

– 1	
+ 1	
+ 2	
*	
+1	
+ 1	

– 1
– 1
– 6
+ 5
+ 8
0

I
+3
– 10

– 9

+3
+1

II
+6

+1
III – 1

XII

*
VII
+1
+ 8

IV

XIV

*

X
– 1
– 6 VIII

V
– 1
– 3

*

IX

– 2
– 1

*

XI

– 1
+1

*Insufficient response.

XV
XVI

*

noted farmers increased their share and 9 percent noted
farmers decreased their share).

1.	 Annual percentage change in Seventh District farmland
	 cash rental rates adjusted by PCEPI
percent
20

10

0

−10

−20
1982

’85

’88

’91

’94

’97

2000

’03

’06

’09

’12

’15

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.

(see table and map on front). On the one hand, Michigan
and Wisconsin had year-over-year increases in farmland
values of 5 percent and 8 percent, respectively, for the first
quarter of 2015. On the other hand, year-over-year declines
were registered for Illinois, Indiana, and Iowa in the first
quarter of this year (–1 percent, –1 percent, and –6 percent,
respectively). The relative reliance of these states on revenues from corn and soybeans helps explain the divergence:
For 2014, Illinois, Indiana, and Iowa had corn and soybean
sales make up 95 percent, 93 percent, and 96 percent, respectively, of total crop revenues, whereas for Michigan and
Wisconsin, these percentages were 54 and 63, respectively,
according to data from the U.S. Department of Agriculture
(USDA). Corn prices were down 16 percent and soybean
prices were down 28 percent in March 2015 compared
with a year earlier, based on USDA data. So, naturally,
the states with a greater dependence on corn and soybean
revenues would face more downward pressures on their
farmland values.
Farmland markets were sluggish in the three- to sixmonth period ending with March 2015 compared with the
same period ending with March 2014. Only 8 percent of the
survey respondents reported higher demand to purchase
farmland, while 46 percent reported lower demand. The
supply of farmland for sale was also lower: There was a decrease in the amount of farmland for sale during the most
recent winter and early spring relative to a year ago, as just
9 percent of the responding bankers observed more farmland was up for sale in their areas and 50 percent reported
less. Moreover, the number of farms sold was down in the
winter and early spring relative to a year ago, though the
amount of acreage sold dipped to a lesser extent. Survey participants observed farmers having slightly increased their
share of farmland acres purchased (relative to investors)
in the three- to six-month period ending with March 2015
versus the same period ending with March 2014 (14 percent

Cash rates to lease farmland decreased 8 percent in
the District for 2015 relative to 2014; this was the largest
annual average decrease since 1987 and the only consecutive decline in nominal terms since then. For 2015, annual
average farmland cash rental rates decreased 8 percent in
Illinois, 6 percent in Indiana, 10 percent in Iowa, and 8 percent in Wisconsin, but increased 1 percent in Michigan.
District cash rental rates declined almost 9 percent from
2014 when adjusted for inflation using the PCEPI (see
chart 1)—the first consecutive negative result since 2001
according to this measure. In 2015, the inflation-adjusted
index of farmland cash rental rates was down more than
the inflation-adjusted index of agricultural land values (see
chart 2). In fact, in 2015, real cash rental rates had fallen
slightly below their level in 1981, whereas real farmland
values were still 45 percent higher than their 1981 level.
Changes in cash rental rates have historically lagged
changes in farmland values, so 2015’s large decline was
atypical. The drop in 2015 cash rents stemmed from lowered
expectations for making a profit from farming rented ground
in 2015 (given the recent decreases in crop prices). Faced
with the possibility of acres going fallow, farmland owners seemed to have agreed to reductions in cash rents, even
though farmland values had not shown much weakness
in most of the District. Farmland values might have resisted a similarly sized downward correction because farm
operations were generally profitable enough over the past
decade to generate reserves of funds available to purchase
farmland in a market that has now slowed. Furthermore,
interest rates remained extremely low, providing lower
discounts to future earnings from the ground and ultimately supporting farmland values. Additionally, the
livestock sector seemed to have supported farmland values, particularly in Wisconsin. Even though milk prices

2.	Indexes of Seventh District farmland adjusted by PCEPI
index, 1981=100
200

150

Farmland
values
100

Cash
rental rates
50

0
1980

’85

’90

’95

2000

’05

’10

’15

Note: Both series are adjusted by PCEPI for the first quarter of each year.
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
		

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

(percent)	

(percent)	 (percent)	(percent)

2014
	Jan–Mar	
	Apr–June	
July–Sept	
	Oct–Dec	

114	
110	
123	
137	

128	
123	
106	
109	

96	
93	
85	
69	

67.0	
67.3	
69.5	
70.6	

4.93	
4.86	
4.89	
4.87	

5.07	
4.98	
5.01	
5.03	

4.66	
4.67
4.62
4.61

2015
	Jan–Mar	

141	

105	

57	

69.0	

4.80	

4.95	

4.57

At end of period.
Bankers responded to each item by indicating whether conditions in the current quarter were higher or lower than (or the same as) in the year-earlier quarter. 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, https://www.chicagofed.org/publications/agletter/index.
a

b

plunged 34 percent from March 2014, stellar returns last
year probably helped support agricultural land values in
dairy regions. Also, cattle prices were up 8 percent from
March last year, although the relatively smaller role of
the cattle industry in the District would tend to mute this
support for farmland values.

Credit conditions
Agricultural credit conditions remained mixed in the first
quarter of 2015 compared with the first quarter of 2014.
The index of demand for non-real-estate farm loans was
141, indicating a solid increase in demand as farmers in
Illinois and Iowa were especially in need of financing.
Fifty-three percent of the reporting bankers observed higher
loan demand compared with a year ago, and 12 percent
observed lower demand. At 105 (its lowest level since 2008),
the index of funds availability denoted slight improvement,
with 15 percent of the survey respondents reporting their
banks had more funds available to lend than a year ago
and 10 percent reporting their banks had less. The average
loan-to-deposit ratio for the District was 69 percent, which
was higher than a year ago but down from the previous
quarter. Also, as of April 1, 2015, new record lows for the
survey were set for the average interest rates on operating
loans (4.80 percent), agricultural real estate loans (4.57 percent), and feeder cattle loans (4.95 percent).
Dropping to its lowest level since 1999, the index of
repayment rates for non-real-estate farm loans was 57 for
the first quarter of 2015, with 2 percent of the responding
bankers noting higher rates of repayment and 45 percent
noting lower rates; this index value reflected a broader
deterioration in agricultural conditions across the District
compared with a year ago. Furthermore, 40 percent of the
survey respondents reported more loan renewals and extensions over the January through March period of 2015
compared with the same period last year, while less than
1 percent reported fewer of them. Seventeen percent of
the survey respondents indicated that their banks required
larger amounts of collateral for loans during the January
through March period of 2015 relative to the same period

last year, while none indicated that their banks required
smaller amounts.

Looking forward
Almost half of the survey respondents predicted farmland
values to decrease in the second quarter of 2015, while less
than 1 percent expected farmland values to increase and
51 percent expected them to be stable. These results were
based on expectations for lower income from crop operations, as well as expectations for tighter profit margins
from dairy and hog operations, in 2015 relative to 2014.
Non-real-estate farm loan volumes were anticipated
by survey respondents to keep increasing during the April
through June period of 2015 compared with the same
period of 2014; in particular, they expected volumes for
operating loans, feeder cattle loans, and loans guaranteed
by the Farm Service Agency of the USDA to rise. Farm
real estate loan volumes were projected to diminish in
the second quarter of 2015 compared with the second
quarter of 2014, reflecting expected weaker agricultural
income for the District.
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.
© 2015 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 https://www.chicagofed.org.

SELECTED AGRICULTURAL ECONOMIC INDICATORS

Percent change from

	
	
	
	

Latest		
Prior	
Year	
Two years
period	
Value	 period	ago	 ago

Prices received by farmers (index, 2011=100)	
	 Crops (index, 2011=100)	
		Corn ($ per bu.)	
		Hay ($ per ton)	
		Soybeans ($ per bu.)	
		Wheat ($ per bu.)	
	 Livestock and products (index, 2011=100)	
		 Barrows & gilts ($ per cwt.)	
		 Steers & heifers ($ per cwt.)	
		Milk ($ per cwt.)	
		Eggs ($ per doz.)	

March	
102	
3.0	
– 8	
–7
March	
86	
1.2	
– 9	
–23
March	
3.81	
0.5	
–16	
– 47
March	
160	
3.2	
– 6	
–18
March	
9.84	 – 
0.8	–28	–33
March	
5.70	
– 3.2	
–15	
– 27
March	
117	
2.6	
– 9	
9
March	
50.70	
– 0.2	
– 38	
–14
March	 162.00	 0.6	 8	28
March	
16.60	
–1.2	
– 34	
–13
March	 1.55	 20.2	25	36

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

March	
March	

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

March 1	
March 1	
March 1	
March	
March	
March	
March	
March	
March	
March	

236	 0.2	0	2
246	 0.2	2	4
– 
7,745	 N.A.	11	43		
1,334	 N.A.	34	34
1,124	
N.A.	
6	
–9
1.93	
9.2	
0	
– 5
2.11	 8.6	14	 9
16.9	
11.9	1	2

12,176	
155	
91	
72	

5.8	
–2.2	
– 46.2	
12.6	

–11	
– 25	
– 22	
– 8	

4		
109
34
– 30

Farm machinery (units) 						
	 Tractors, 40 HP or more	
March	
6,901	
N.A.	
–14	
–14
		 40 to 100 HP	
March	
4,416	
N.A.	
–7	
0
		 100 HP or more	
March	
2,485	
N.A.	
–  5	
2
–  0
3
	 Combines	
March	
332	
N.A.	
– 57	
–  66
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