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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago

AgLetter

Number 1949	

FARMLAND VALUES AND CREDIT CONDITIONS

August 2010

CONFERENCE ANNOUNCEMENT

Summary
Agricultural land values for the second quarter of 2010
rose 6 percent from the level of a year ago in the Seventh
Federal Reserve District. The value of "good" farmland
was unchanged in the second quarter compared with the
first quarter of 2010, according to a survey of 198 agricultural bankers covering the period from April 1, 2010, through
June 30, 2010. For the third quarter of 2010, 85 percent of the
respondents anticipated stable farmland values, and the
rest were evenly divided between higher and lower values.

The Intersection of Midwest Agriculture
and Rural Development
On November 9, 2010, the Federal Reserve Bank of Chicago
will hold a conference to explore perspectives on the role
that Midwest agriculture can play in rural development. A
particular focus of the conference will be the entrepreneurial
nature of agriculture and policies that can foster agricultural
entrepreneurs. For more details and the forthcoming agenda,
see www.chicagofed.org/webpages/events/2010/agriculture_
conference.cfm.

were about the same as three months earlier. There was
an increase in the average loan-to-deposit ratio for the
District from 73.7 percent to 74.5 percent.

Agricultural credit conditions were somewhat similar
to those of the second quarter a year ago, while showing
some improvement from the prior quarter. Non-real-estate
loan demand was about on par with the levels experienced
a year earlier. The portion of agricultural loans perceived
by respondents as having "major" or "severe" repayment
problems was less than 4 percent again in 2010. Also, the
directions of the loan repayment rate and the flow of loan
renewals and extensions were unchanged. Funds availability
increased at about the same proportion of District banks
as in the second quarter of 2009. Interest rates on agricultural operating loans and mortgages, as of July 1, 2010,

Farmland values
A year-over-year increase of 6 percent in the value of
District agricultural land occurred due to the weakness
in farmland values during the second quarter of 2009
(see chart 1). Wisconsin was the only state to have lower
farmland values compared with those from a year ago,
reflecting the struggles of the dairy industry. Agricultural
land values in Illinois, Indiana, and Iowa were up 5 percent,
4 percent, and 8 percent, respectively. "Good" farmland in

Percent change in dollar value of “good” farmland
Top:
April 1, 2010 to July 1, 2010
Bottom: July 1, 2009 to July 1, 2010
	
	
	

Illinois	
Indiana	
Iowa	
Michigan 	
Wisconsin	
Seventh District	

XII

VI
–1
–2

April 1, 2010	
to	
July 1, 2010	

July 1, 2009
to
July 1, 2010

+  	
1
0	
0	
*	
+  	
2
0	

+ 
5
+ 
4
+ 
8
*
– 
1
+6

+1
+2

II

I
–2
+8

+4
+14

–1
III +6

VII
+3
+1

IV

XIV

*

X
+4
+1 VIII

V

+1
+7

*Insufficient response.

*

*

IX
–1
+7

–3
+3

XV

XI
+1
+8

XVI

+1
+5

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

2001

’02

’03

’04

’05

’06

’07

’08

’09

’10

the District had no change in value compared with
the first quarter of 2010 (see table and map). Illinois and
Wisconsin had quarterly increases, while Indiana and
Iowa farmland values were unchanged for the second
quarter of 2010.
Location has been a major determinant for farmland
values this year, even more significant than quality at times.
There have been reports of prices boosted by bidding between farmers for desired parcels of farmland. However,
higher quality land has tended to gain the most in value
over the longer term.
The expected stream of earnings from crop production has seemed to stabilize, providing support for farmland values. Crop revenue for 2009 in the five-state region
was down for the second year in a row, in spite of strong
yields. The District value of corn for grain produced in
2009 was $23.0 billion, and the value of soybeans was
$12.6 billion. In 2010, corn and soybean prices seemed to
stabilize, easing a drag on farmland values from last year.
July corn prices were about the same as a year ago; soybean prices were 9 percent lower than the previous July,
but higher than earlier in the year.
Also, the U.S. Department of Agriculture (USDA)
estimates the 2010 harvest of corn for grain to rise 2 percent
from 2009 for the nation and 4 percent for the five-state
region. Soybean production is estimated to increase 2 percent for the U.S. and 5 percent for the region. According
to these projections, the 2010 corn and soybean harvests
would set new records. Total usage of corn, at 13.5 billion
bushels, would leave U.S. ending stocks at 1.31 billion
bushels. Total soybean usage of 3.24 billion bushels would
result in ending stocks of 360 million bushels. The USDA
estimates price intervals for the 2010–11 crop year of $3.50
to $4.10 per bushel for corn and $8.50 to $10.00 per bushel
for soybeans. Even with record harvests, corn stocks will
be the tightest in seven years, especially as the demand

for food rebounds along with the global economy. Rising
demand for U.S. grain should provide support for both
corn and soybean prices, which in turn will enhance
District farmland values. This year's higher livestock
prices have provided an additional boost to farm income
in the District.
The expectations of responding bankers for upward
and downward movement in farmland values were equal
going into the third quarter of 2010. Moreover, 85 percent
of survey respondents anticipated District agricultural
land values to stay the same in the third quarter as they
were in the second quarter.

Credit conditions
There were some signs of improvement in agricultural
credit conditions for the District during the second quarter of 2010, along with some similarities to the previous
year. Non-real-estate agricultural loan demand was slightly
below the level of the prior year, as 23 percent of the
respondents saw increases and 25 percent saw decreases.
The index of non-real-estate agricultural loan demand
was 98. One banker noted reluctance on the part of borrowers due to doubts about the strength of the national
economy. Indiana and Wisconsin saw drops in nonfarm
loan demand, in contrast with the other states.
The index of funds availability was 122, as 28 percent of the banks had more funds available and 6 percent
had less. Collateral requirements for loans were stiffer at
28 percent of the reporting banks, with no change in requirements at 72 percent. The District average for loan-to-deposit
ratios edged up to 74.5 percent—5.1 percent below the
ratio desired by the banks.
Repayment rates for non-real-estate farm loans
were still lower from April through June than a year
earlier, but the year-over-year difference was less than
in January through March. The index of loan repayment
rates increased to 85, with 8 percent of the respondents
2. Quarterly District farm loan interest rates
percent
13

11

Farm
operating

9

Farm real
estate
7

5
1990

’92

’94

’96

’98

2000

’02

’04

’06

’08

’10

Credit conditions at Seventh District agricultural banks
		
		
		
		

		
2008
	 Jan–Mar	
	 Apr–June	
	 July–Sept	
	 Oct–Dec	

	
	
	
	
	
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)

110	
101	
117	
115	

129	
124	
103	
110	

147	
137	
115	
113	

75.9	
75.2	
78.8	
76.4	

6.74	
7.06	
6.74	
6.21	

6.86	
6.77	
6.85	
6.33	

6.41
6.51
6.56
6.23

2009
  	Jan–Mar 	
	 Apr–June	
	 July–Sept	
	 Oct–Dec 	

116	
88	
95	
102	

112	
118	
121	
125	

105	
93	
89	
92	

76.2	
77.3	
75.3	
75.4	

6.20	
6.18	
6.17	
6.23	

6.31	
6.36	
6.35	
6.40	

6.14
6.16
6.13
6.13

2010
	 Jan–Mar	
	 Apr–June	

109	
98	

127	
122	

79	
85	

73.7	
74.5	

6.13	
6.12	

6.25	
6.25	

6.04	
5.99

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 that responded “lower” from the percentage that 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

seeing higher rates of loan repayment and 23 percent seeing lower rates. The severe drop in loan repayment rates
for Wisconsin has eased due to some recovery in dairy
prices, which helped trim the number of problem loans
there. The percentage of respondents' farm loan volume
classified as having "major" or "severe" repayment problems
was exactly the same as a year ago (3.5 percent). Renewals
and extensions of non-real-estate agricultural loans in the
second quarter of 2010 were higher than in the same
quarter of 2009 (though not by as much as in the first
quarter versus the previous year), as 22 percent of respondents reported increases and 6 percent decreases.
Interest rates on agricultural loans edged down
again (see chart 2). As of July 1, the District average for
interest rates on new operating loans was 6.12 percent,
more than 260 basis points lower than the most recent
peak four years earlier. Farm mortgage rates averaged
5.99 percent, almost 190 basis points lower than four
years ago and just the second dip below 6 percent in the
history of the survey.
The competitive environment for agricultural lending
closely mirrored that of a year ago. For both operating
loans and mortgages, at least 40 percent of the respondents
perceived that the Farm Credit System had increased its
share of agricultural lending in their vicinity during the
first half of 2010; only 5 percent perceived lower lending
by the Farm Credit System. Lending by merchants, dealers,
and other input suppliers increased in almost one-third
of the areas near reporting banks. There was less lending
by life insurance companies overall, but their lending was
up slightly in Illinois. Lending by banks grew for farm

operating loans, but banks lent less for farm real estate
relative to normal activity in their areas. Some banks priced
their loans in order to limit their share of the agricultural
lending market.

Looking forward
Agricultural loan volumes were anticipated to remain
about the same for the third quarter of 2010 compared
with the same quarter of 2009. For the period from July
through September, 20 percent of the responding bankers
forecasted farm non-real-estate loan volume to be higher
than the previous year, while 18 percent forecasted lower
volume. Once again, respondents expected higher volumes for operating loans and loans guaranteed by the
Farm Service Agency in the third quarter of 2010.
David B. Oppedahl, 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, 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.
© 2010 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 www.chicagofed.org.

Selected agricultural economic indicators
	
	
	
	

Percent change from
Latest		
period	
Value	

Prior	
period	

Year	
ago	

Two years
ago

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.)	

July	
July	
July	
July	
July	
July	
July	
July	
July	
July	
July	

143	
153	
3.55	
112	
9.79	
4.74	
131	
58.10	
95.10	
16.00	
0.71	

3.6	
4.1	
4.1	
– 1.8	
3.6	
13.7	
1.6	
– 0.7	
0.3	
3.2	
14.4	

10	
3	
– 1	
– 3	
– 9	
– 8	
17	
32	
11	
42	
0	

– 10
– 16
– 32
– 32
– 26
– 34
– 5
4
– 5	
– 17
– 16

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

July	
July	

218	
219	

0.3	
– 0.1	

1	
1	

– 1
2

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.)*	

June 1	
June 1	
June 1	
July	
July	
July	

4,310	
571	
973	
2.23	
1.70	
15.3	

N.A.	
N.A.	
N.A.	
– 3.9	
– 7.1	
0.7	

1	
– 4	
48	
– 2	
– 7	
3	

7
– 16
218
– 6
– 8
3

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

June	
June	
June	
June	

8,011	
173	
28	
74	

– 3.1	
– 11.3	
– 11.9	
8.8	

5	
16	
– 53	
17	

– 16	
– 6
– 55
– 6

	

	

Farm machinery (units) 							
	 Tractors, over 40 HP	
July	
6,714	
N.A.	
– 1	
– 21
	 	 40 to 100 HP	
July	
4,651	
N.A.	
3	
– 28
	 	 100 HP or more	
July	
2,063	
N.A.	
– 10	
2
	 Combines	
July	
1,189	
N.A.	
4	
39
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