View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

•

It

ri

Federal Reserve Dank of Chicago July 25, 1958

FARM LAND VALUES continued their sideways
movement this spring. Reports from country bankers in
the Seventh District show that from April to July values
are substantially unchanged although above the levels
of year earlier. Bankers in Michigan estimated values
at 2 per cent below April while bankers in other states
estimated little or no change in values.

tte

All this suggests a breathing spell has been reached
in the rapid advance in farm land prices of the past few
years. However, the potential of further increases remains. While the estimates of land values were essentially unchanged, 22 per cent of the bankers estimated
the underlying "trend" in land values to be up. Only
one banker out of twenty thought the trend was down and
nearly three out of four said it was stable. This was an
upward shift in expectations from the April survey when
only 18 per cent of the bankers thought the trend was up
and 9 per cent said it was down.

•

Number 466

U. S. DEPAR Changqs A tin_exuctations have apparently played a
predominaTirla4n41ie movement of land prices. With
the continued inflation after the end of the Korean War,
land became a "hedge against inflation." Coupled with
declines in returns- on other types of investment, such
as yields on common stock, this led to a willingness to
purchase land at the current prices even though the rate
of return was not as large as during the previous decade.
This motive seems now to have been dulled, if not stopped. The bankers report that farmers this year are spend.
Historically, farm land prices have fluctuated with
ing money cautiously, repaying debts and refraining from
the movements in farm prices and farm incomes. During
undertaking new debts. Of course, if a real shooting war
both World War I and World War II these measures exshould break out in the Middle East, this would all be
perienced large rises. After World War I the sharp drop
changed.
in farm prices and incomes was accompanied by a decline in land values. However, when it became evident
The future trend of land values, of course, remains
that farm land values were beginning to drop after World
uncertain. Over a fairly long period of years, farm inWar II, the Korean War brought a new spurt to prices.
come must play a key role in determining the trend. However, some hold views much less uncertain than others.
The puzzling event has been the resurgence of land
A large farm management firm, for example, has recently
have
been
explanations
values since 1954. Numerous
stated: "The question is not, 'Will land p- rices go up?'
put forth, but they have had to rest on factors other than
but, 'How fast will land prices advance?'" The present
farm income. A number of factors have pointed toward
leveling off of values, in this context, would be merely a
lower rather than higher farm land prices in the past
temporary interruption of an upward surge. On the other
several years—the decline in farm prices and income
in
decline
hand, it could signal the end of a 25-year rise.
the
and
rates
interest
until 1957, increases in
and
prices
farm
when
year,
this
Now,
farm population.
Research Department
incomes have increased, land values have leveled off.

per cent, 1947-49:100
150

100

\%ye° %

price of farm land

•
%4.0

e.4%
e

50

•
•
ofI

•

‘
%

•
"t.

elf

,#'1%................"
%
.
01111 WO
%
•

%
1
.V .

s

realized net farm income

No'
I

1915

1920

I

I

1925

I

Ii 1 1 1 1 1 I
1935
1930

III

1940

1945

1

1950

1955

s

Per cent change in dollar value of "good" farms
April 1, 1958 to July 1, 1958
(based on reports of Identical banks)

Per cent change
April 1, 1958
to
July 1, 1958
Illinois
Indiana
Iowa
Michigan
Wisconsin
SEVENTH DISTRICT • • •

'0
—1
—1
—2

-1
-1

* Figures not Included due to limited number of reports

Current trend in farm land values based on opinions of
country bankers as reported in July, 1958
Per cent of banks reporting trend is:
Up
TOP:
CENTER: Stable
BOTTOM: Down

Illinois
Indiana
Iowa
Michigan
Wisconsin
SEVENTH DISTRICT

Up

Stable

Down

23
22
23
15
29
22

73
72
76
77
65
73

4
6
1
8
6
5

•