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F3/3 ricu.t Federal Reserve Dank of Chicago - - ' April 18, 1969 FARMLAND PRICES continued to edge upward in the Seventh Federal Reserve District during the first quarter. According to a survey of country bankers, the average value of "good" farmland rose about 1 percent-3 percent since April 1968. Prices were still weak in most areas of the Corn Belt states with some areas reporting declines. But prices were strong in the southeastern parts of Wisconsin and Michigan. (See back of Letter.) Bankers were still uncertain about the future of land prices. While most of those responding to the survey still - view the trend as stable or upward, an increasing proportion foresee lower prices ahead. About 14 percent expect prices to turn downward—nearly twice the proportion expressing that view at the beginning of the year. Fewer Farm Sales Indicated • Stable Down Up 1968 1969 1968 1969 1968 1969 (Percent banks reporting) Illinois Indiana Iowa Michigan Wisconsin Seventh District 29 38 19 46 57 36 19 35 14 30 47 26 4 10 18 6 4 8 23 17 24 11 10 19 67 52 62 48 39 56 58 48 61 60 43 55 Expectations varied with the area, however. The greatest proportion of bankers expecting declines were in the cash-grain areas of the Corn Belt states. Nearly 29 percent of the respondents from Illinois, for example, foresaw further declines. By contrast, no Wisconsin banker expected lower land prices. This difference in views reflects, at least in part, differences in the types of agriculture predominate in areas the bankers serve and prospects for the farm economy in those areas. Crop prices have been at relatively low levels for several months, resulting in reduced income to most cash-grain operators. Crop receipts of farmers in the district states were 3 percent less in 1968 than in 1967. During January they were 22 percent less than during the same month a year before. Livestock receipts, on the other hand, were about 5 percent higher in 1968 than in 1967. So far in 1969, they have averaged about 8 percent higher than last year. The continued difficulty of many farmers in obtaining acceptable financing terms also may account for bankers expecting further softening in land prices. The effect of credit accessibility apparently also varied by area, because of different tter Number 1009 state usury laws. Three district states—Illinois, Iowa, and Michigan—have interest-rate-ceilings of 7 percent. (Legislation pending would boost these rates.) More than half the bankers in Michigan and Iowa and more than a third in Illinois indicated that interest ceilings have restricted the availability of funds to qualified farm borrowers in their areas. The number of farms offered for sale in the district states has declined slightly in the past 12 months. In each state, more bankers reported declines in land sales than a year before. For the district as a whole, nearly a fifth of the bankers indicated declines, compared with only 8 percent a year ago. Farm Operators Purchase Most Farms Other purchasers Farm operators Within Outside Tenants Owners area area Unknown (Percent ofpurchases) 61 10 12 13 Illinois 4 13_ 66 12 8 _Indiana 1 22 66 8 4 Iowa 0 6 54 15 20 Michigan 5 17 10 Wisconsin 49 23 3 14 11 12 Seventh District 61 2 Most of the farmland sold continued to be bought by farm operators, but purchases by nonfarmers increased sharply in some areas. Bankers in Michigan and Wisconsin reported increased activity from nonfarm investors, which could help explain the continued strong rise in land prices in those areas. Because farming is seldom the primary source of income to these buyers, they are probably interested more in location relative to off-farm employment and the amenities of rural living than in income from farming. Roby L. Sloan Agricultural Economist Percent change in dollar value of "good" farms TOP: BOTTOM: IsaDa OtatittlitallRE January 1, 1969 to April 1, 1969 15°111 latnp/atfigrAllakt April 1, 1968 to April 1, 1969 rj AUG, (Based on reports of identical banks) CUrittIT 1959 Ectros nva.,t., ...... ... 4, +3 +7 + XI January 1, 1969 to April 1, 1969 +1 +2 Illinois Indiana Iowa Michigan Wisconsin SEVENTH DISTRICT April 1, 1968 • • to • April 1, 1969 —1 +2 +2 +7 +6 +3 +2 +2 +1 XVI *insufficient number reporting Current trend in farmland values based on opinions of country banks as reported April 1, 1969 Percent of banks reporting is: TOP: CENTER: BOTTOM: Up Stable Down Illinois Indiana Iowa Michigan Wisconsin SEVENTH DISTRICT Up Stable Down 10 20 13 42 65 24 61 62 82 51 •35 62 29 18 5 7 0 14 XVI 10 63 27 XVIr1 431 57 • 0
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