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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago

AgLetter

Number 1969	

FARMLAND VALUES AND CREDIT CONDITIONS

August 2015

CONFERENCE ANNOUNCEMENT
Labor Issues Facing Agriculture and the Rural Midwest

Summary
Agricultural land values in the Seventh Federal Reserve
District decreased 3 percent from a year ago for the second
quarter of 2015. In addition, “good” farmland values moved
down 1 percent from the first quarter to the second quarter
of 2015, according to a survey of 221 agricultural bankers.
The declines in farmland values may have been tempered
by a rally in corn and soybean prices toward the end of
the second quarter, before these crop prices slid in July.
Just 1 percent of survey respondents projected farmland
values to increase during the third quarter of 2015, while
40 percent projected them to decrease and 59 percent
projected them to be stable.

On November 17, 2015, the Federal Reserve Bank of Chicago
will hold a conference to explore labor issues affecting agriculture
and the rural Midwest. At the conference, experts will discuss
work force trends, labor challenges, and ways to position the
midwestern economy and agriculture for prosperous futures.
For more details and to register, go to https://www.chicagofed.org/
events/2015/annual-agricultural-conference.

June period of 2015 as in the same period of 2014, according
to respondents. For the second quarter of 2015, the District’s
average loan-to-deposit ratio was 72.1 percent—7 percentage
points below the average level sought by the responding
bankers. Not to be overlooked, interest rates on agricultural
loans were slightly higher than in the previous quarter.

The District’s agricultural credit conditions were
weaker in some regards than those of a year ago, even while
demand for non-real-estate farm loans was again stronger.
For the second quarter of 2015, repayment rates for nonreal-estate farm loans were down from a year earlier, leading
to upticks of loans with minor, major, and severe repayment
problems within the District’s aggregate loan portfolio.
Also, renewals and extensions of non-real-estate farm loans
were higher than their level of the same quarter in the previous year. The availability of funds for lending by agricultural banks was more or less the same in the April through

Farmland values
Given that District farmland values were 3 percent
lower than their level of a year ago, the downward trends
in agricultural product prices seemed to have translated into
lower farmland values. In part, the 3 percent year-over-year
decrease in farmland values for the second quarter of 2015
might simply be the flip side of the rapid gains in recent
years (see chart 1 on next page). Both Illinois and Iowa had
year-over-year decreases in agricultural land values for at

Percent change in dollar value of “good” farmland
Top:
April 1, 2015 to July 1, 2015
Bottom: July 1, 2014 to July 1, 2015
	
	
	
Illinois	
Indiana	
Iowa	
Michigan 	
Wisconsin	
Seventh District	

VI
–3
– 4

April 1, 2015	
July 1, 2014
to	to
July 1, 2015	
July 1, 2015
–2	
+ 2	
0	
*	
– 2	
–1	

–  6
+4
– 7
+ 6
– 2
– 3

I
+1
– 8

II
–1
–17
+1
III 0

–1
+1

*
VII
+2
–2

IV
–1
– 6 VIII

V
– 2
–7

*Insufficient response.

XII

XIV

*

X

*

IX
– 6
– 12

XV

XI
– 2
– 5

XVI

*

*

1.	 Year-over-year changes in Seventh District farmland values,
	 by quarter
percent
30
25
20
15
10
5
0
−5

2002 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

’11 ’12 ’13 ’14 ’15

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

least four consecutive quarters, and Wisconsin had its first
year-over-year decline since the first quarter of 2013; in
contrast, Indiana and Michigan saw year-over-year increases
in farmland values. After seeing a quarterly uptick in the
prior quarter, District farmland values decreased 1 percent
in the second quarter of 2015 relative to the first quarter;
only Indiana saw a quarterly increase in farmland values
in the second quarter (see table and map on front).
Many agricultural products have fallen in price over
the past two years, contributing to the slide in farmland
values. According to the U.S. Department of Agriculture
(USDA), corn prices averaged $3.65 per bushel in the second
quarter of 2015—down 21 percent from a year ago and 48 percent from two years ago. At $9.63 per bushel in the second
quarter of 2015, soybean prices were down 33 percent
from one year ago and 35 percent from two years ago. In
July of this year, the USDA estimated that the 2015 U.S.
harvest of corn for grain would fall short of the all-time
record set in 2014 by 4.8 percent and the harvest of soybeans
would miss the all-time high set last year by 2.1 percent.
Even without setting a new record, the soybean harvest
would boost crop stocks to levels not seen in almost a
decade, while corn stocks would tighten slightly from a
year ago. For the 2015–16 crop year, the USDA estimated
price intervals of $3.45 to $4.05 per bushel for corn and $8.50
to $10.00 per bushel for soybeans. When estimated with the
midpoints of these price ranges, the values of the U.S. corn
and soybean harvests in 2015 are projected to be 3.5 percent
and 9.9 percent lower than the 2014 harvests, respectively.
Notably, amid concerns about spring planting problems
and excess moisture in parts of the Corn Belt, a summer
rally in crop prices might have helped prevent even deeper
erosion of farmland values toward the end of the second
quarter of 2015. Yet, the rally faded in July as crop conditions improved and expectations of better harvests firmed.
Not only were decreasing crop prices a drag on agricultural land values, but so were falling livestock prices.

With 46 percent of the U.S. hog herd in the five District states,
price decreases for barrows and gilts (down 28 percent
from a year ago and 19 percent from two years ago in June)
indicated strains in the hog sector. Milk prices were down
27 percent from a year ago and 13 percent from two years
ago in June. Given that over 23 percent of U.S. milk production was from the five District states in 2014, their dairy
farms made up a major part of the dairy sector. Although
these sectors have been under pressure from downward
price trends, there was a recent hint of improvement—small
increases in prices from May to June. Moreover, livestock
producers benefited from lower feed costs in the past two
years. In addition, cattle and egg prices remained elevated as
production (supply) issues pushed prices higher over the
previous two years. So, livestock prices have likely had a
mixed impact on District farmland values thus far this year.

Credit conditions
Agricultural credit conditions in the second quarter
of 2015 still showed some signs of good health, but signs of
weakness were also present. Repayment rates for non-realestate farm loans were down relative to a year ago again
during the second quarter of 2015. The index of loan repayment rates moved up to 64, with 1 percent of responding
bankers noting higher rates of loan repayment than a year
ago and 37 percent noting lower rates. The slippage in repayment rates over the past year resulted in more agricultural
loans having minor, major, or severe repayment problems
(7 percent, 3 percent, and nearly 1 percent of the District
loan portfolio, respectively). Also, 33 percent of the survey
respondents observed more loan renewals and extensions
over the April through June period of 2015 compared with
the same period last year, while just 1 percent observed
fewer of them.
District averages for interest rates on agricultural
loans moved up a bit in the second quarter of 2015. As of
July 1, 2015, the average for interest rates on farm real estate loans had risen to 4.64 percent—the highest level of
the past year (see chart 2 below and table on next page). The
2. Quarterly Seventh District farm loan interest rates
percent
13
11

Farm
operating

9

Farm real
estate

7
5
3
1993

’95

’97

’99

2001

’03

’05

’07

’09

’11

’13

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

’15

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	
	Apr–June	

141	
140	

105	
102	

57	
64	

69.0	
72.1	

4.80	
4.81	

4.95	
4.97	

4.57
4.64

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

average for interest rates on feeder cattle loans edged up to
4.97 percent, and the average for interest rates on new farm
operating loans was up a hair, to 4.81 percent. The availability of credit tightened in the second quarter of 2015
relative to the second quarter of the previous year, as 15 percent of the survey respondents reported that their banks
required larger amounts of collateral and none reported
that their banks required smaller amounts. Banks had slightly
more funds available to lend in the second quarter of 2015
than a year ago. With 9 percent of responding bankers
reporting their banks had more funds available to lend
and 7 percent reporting their banks had less, the index of
funds availability was 102 in the second quarter of 2015—
its lowest value since the third quarter of 2006.
Meanwhile, demand for non-real-estate loans remained
at a higher level than a year earlier. With 50 percent of survey
respondents reporting higher demand for non-real-estate
loans compared with a year ago and 10 percent reporting
lower demand, the index of loan demand was 140 for the
second quarter of 2015. In the first six months of 2015, the
amount of farm operating loans generated by banks was well
above what is considered historically normal, whereas the
amount of farm mortgages was a bit lower than normal.
Therefore, for the second quarter of 2015, the District’s average
loan-to-deposit ratio jumped to 72.1 percent—7 percentage
points below the average level desired by survey respondents (which was a narrower gap than those seen in recent
years). According to responding bankers, over the first six
months of 2015, the amounts of operating loans and mortgages originated by lenders in the Farm Credit System were
higher than normal. Also, in the January through June period
of 2015, merchants, dealers, and other input suppliers expanded their lending for farming, whereas life insurance companies were less active in agricultural lending than typical.

Looking forward
Fifty-nine percent of responding bankers anticipated
stable farmland values in the third quarter of 2015. However,

the majority of the survey respondents may have been influenced by the summer rally in crop prices, which waned
as survey responses were being collected. In addition, with
only 1 percent of responding bankers expecting farmland
values to increase in the third quarter of 2015 and 40 percent
expecting them to decrease, the survey results, on the whole,
indicated ongoing weakness in farmland values.
Survey respondents predicted higher volumes for
non-real-estate agricultural loans—especially operating
loans and loans guaranteed by the Farm Service Agency
of the USDA—in the third quarter of 2015 relative to the
same quarter of 2014. Volumes for farm machinery and
grain storage construction loans, as well as for farm real
estate loans, were forecasted to be lower than the levels
of a year ago in the July through September period of 2015
for the District. Given lower prices for key crop and livestock
products, many farm operators have returned to lenders
in order to shore up reserves of working capital while
attempting to ride out the downward cycle in agriculture.
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
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credited. Prior written permission must be obtained for any
other reproduction, distribution, republication, or creation of
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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.)	

June	
June	
June	
June	
June	
June	
June	
June	
June	
June	
June	

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

June	
June	

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.)	

105	
88	
3.58	
162	
9.58	
5.43	
121	
60.80	
156.00	
16.90	
2.01	

– 1.9	
–7	
– 5
– 2.2	
–  11	
–  20
– 1.1	
–  20	
–  49
– 7.4	
– 18	
– 16
–  0.2	
–  33	
–  37		
1.9	
– 16	
– 26
–  0.8	
–  5	
11
1.3	
–  28	
–  19
–  3.1	
5	
26
1.2	
–  27	
–  13
16.2	 84	117

238	 0.3	0	2
247	 0.3	2	4

June 1	 4,447	 N.A.	15	61
June 1	
625	 N.A.	54	44
June 1	
753	
N.A.	
28	
5
June	
2.00	
3.9	
– 3	
– 7
June	
2.00	 7.2	15	19
June	
16.4	
–  4.7	
1	
3
June	
June	
June	
June	

9,963	
166	
35	
59	

–  6.5	
– 12.7	
–  21.1	
–  9.6	

–  10	
–  12	
57	
– 23	

1
265
78
–  37

Farm machinery (units) 						
	 Tractors, 40 HP or more	
June	
8,384	
N.A.	
–  	
1
–  
8
		 40 to 100 HP	
June	
6,071	
N.A.	
4	
4
		 100 HP or more	
June	
2,313	
N.A.	
–  12	
–  29
	 Combines	
June	
351	
N.A.	
– 50	
– 62
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