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3
Federal Reserve Bank of Chicago -

•

April 17, 1959

LAND VALUES have increased since the first of the
year in half the areas of the Seventh Federal Reserve
District, according to a recent survey of rural bankers,
and values are higher than a year ago in almost all areas.
However, the amount of change from January to April
was small. In that three-month period, only Illinois
showed a significant increase in the value of "good"
farm land (see back of Letter).

er
PARTMENT OF
AGRICULTURE

Number 504
However, many bankers continue to describe the
trend of land values as being upward. Half the bankers
in Iowa and Illinois report the trend to be up, while in
Indiana, Michigan and Wisconsin, the proportion is onethird. Only four bankers in over 400 replies judged the
trend to be down.

strikes on some of the important farm machinery manufacturers was important in holding down sales increases.
As these strikes are settled and production returns to
normal, hankers expected farm machinery sales to show
larger increases. Forecasts of sales by farm machinery
manufacturers have been quite optimistic for 1959.

The pressures behind these increases are, in the
case of farmers, the general influence of the trend toward
larger farm units and the special influence of higher
farm incomes in most areas in 1958. Even with the less
optimistic outlook for hog prices and returns on cattle
feeding in 1959, many farmers are expanding their operations.

Among states in the District, Iowa with the greatest
gain in farm income continues to show the largest increases. Bankers in Iowa reported farm machinery sales
were up 8 per cent compared with a District increase of
3 per cent. Building materials dealers' sales in March
were up 3 per cent in Iowa compared with no change or
declines in the rest of the District. The increase of 4
per cent in fertilizer sales in Iowa was matched in Illinois and Indiana, reflecting the increased corn acreage
in these three states.

To this, of course, must be added "inflation hedge"
buying. Thus, even though the average rate of return
from current investment in farm land appears very low,
the expected return is higher for an extra piece of land
added to another farm or for those who expect continued
inflation in farm land prices.

•

Other indicators of the farm economy also reflect
the improved income in the agricultural areas the past
year. Bankers' estimates of sales of farm machinery,
fertilizer and building materials show gains in sales
during March compared with year earlier in most District
areas. In the case of fertilizer and building materials,
many bankers in the northern areas said sales were
slowed in March because of the severe weather. Indeed
it is interesting to note the strong showing in sales of
farm supplies, in spite of the snowstorms and poor roads.
With the advent of good weather, bankers expected substantial increases in sales.
Bankers' Estimates of Dealers' Sales
March 1959
Farm
Building
machinery
Fertilizer
materials
(per cent change from year ago)
Illinois. • . • • • • • •
Indiana
••
Iowa... • • • • • • ..
Michigan........
Wisconsin ..... • .

+2
0
+8
+3
0

+4
+4
+4
+2
0

0
+3
0
-3.

Seventh District . • •

+3

+3

+1

•

Farm machinery sales have also been affected by
bad weather but many bankers indicated the impact of

Demand deposits of farm customers in these banks
have also posted gains over year-earlier levels. Again,
as in the case of sales of farm supplies, Iowa banks
reported the largest increases.
DEMAND FOR FARM LOANS remains strong. New
bank loans granted to farmers in three Midwest areas
show increases in dollar volume since the first of the
year. In eastern Iowa, the volume has increased 18 per
cent in the January-March period, as compared with year
earlier, and in western Iowa and north and west central
Illinois the gains have been 15 and 12 per cent. Southeastern Wisconsin, however, has shown a modest decline
of 3 per cent from the year-earlier levels.
Interest rates on farm mortgage loans have increased
recently, reflecting both the high level of demand for
farm loans and the higher interest rates on other types
of investments. If the expansion of activity in the business sector of the economy continues and credit demands
of business and consumer increase accordingly, some
farmer mortgage lenders will be under pressure to allocate more funds to these nonagricultural borrowers.
Interest rates on Commodity Credit Corporation loans
on 1958 crops held by banks and other lending agencies
will be increased on May 1 to 2-3/4 per cent. The rate
which the Department of Agriculture has been paying for
farm price support loans is 2-1/2 per cent. Officials of
the Department said the boost will bring the rate "more
in line with current rates" in the money market.
Research Department

Per cent change in dollar value of "good" farms
January 1, 1959 to April 1, 1959
(based on reports of Identical banks)

Per cent change
January 1, 1959
to
April 1, 1959

•
•
•

+1

Illinois .. 000000*
Indiana ......e....
Iowa
Michigan ....•.11•0.
Wisconsin .. ..• •..

0

•

'
e s%

0
0
0

SEVENTH DISTRICT .•

Current trend in farm land values based on opinions of
country bankers as reported in April 1959

s

Per cent of banks reporting trend is:
TOP:i
Up
CENTER: Stable
BOTTOM: Down

43
48
52

42
58

V111 58
38
4

60
40
III 64
36

41
59

Up

Stable

Down

50
35
51
31
37

49
,62
49
69
61

1
3
0
0
2

SEVENTH DISTRICT .. 43

56

1

Illinois ...........
Indiana .0000060 OS.
Iowa ....000004 00.
Michigan .000 00. 00.
Wisconsin......• ii 11 •

\

69
31

48
52
35
59
6

'`•.
XVV-1
.36
64
•
•
•I
0
,..,.
1
1