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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago

AgLetter

Number 1960	

May 2013

FARMLAND VALUES AND CREDIT CONDITIONS

SAVE THE DATE

Summary
On the whole, “good” farmland values kept rising in the
Seventh Federal Reserve District during the first quarter
of 2013, but signs of moderation in farmland value gains
emerged. Agricultural land values appreciated 4 percent
in the first quarter of 2013 relative to the fourth quarter
of 2012, based on the survey responses of 219 District
agricultural bankers. This quarterly increase was smaller
than that of the previous survey. That said, the year-overyear increase in agricultural land values was 15 percent
in the first quarter of 2013, nearly matching the annual
gain of 2012. Both the District’s quarterly and year-overyear increases in farmland values masked the weaker
results of some areas, such as Wisconsin.

On November 19, 2013, the Federal Reserve Bank of Chicago
will hold a conference to explore the risks faced by agricultural
producers and lenders, as well as the risk-management
tools available to them. Details are forthcoming on
www.chicagofed.org and in the next issue of AgLetter.

Credit conditions continued to improve for agricultural producers. Both the index of availability of funds to
lend and the index of repayment rates for non-real-estate
farm loans moved up, although they did not reach their
peaks. In addition, fewer renewals and extensions of
these loans indicated improvement in credit conditions.
Yet, the index of demand for non-real-estate loans in the
first quarter of 2013 fell to its lowest level since 1986. At
63.7 percent, the average loan-to-deposit ratio had not
been lower since 1994. Interest rates on farm loans moved
down further to new lows for the survey.

Demand to purchase agricultural land increased in
the three- to six-month period ending with March 2013
compared with the same period a year ago. Similarly, the
number of farms sold, the amount of acreage sold, and
the amount of farmland for sale rose during the winter
and early spring of 2013 compared with a year ago. Additionally, farmland cash rental rates in the District were
11 percent higher in 2013 compared with 2012. With regard
to agricultural land values during the second quarter of 2013,
over three-quarters of the responding bankers expected
them to be stable.

Farmland values
District agricultural land values rose 4 percent in the first
quarter of 2013 relative to the fourth quarter of 2012, easing
down from the quarterly increase of last year’s final quarter.
However, the year-over-year increase in District farmland
values was 15 percent in the first quarter of 2013, almost
matching the annual gain of 2012. Furthermore, the District’s

Percent change in dollar value of “good” farmland
Top:
January 1, 2013 to April 1, 2013
Bottom: April 1, 2012 to April 1, 2013
	
	
	

January 1, 2013	
April 1, 2012
to	to
April 1, 2013	
April 1, 2013

Illinois	
+ 5	
+19
Indiana	
+ 4	
+ 15
Iowa	
+ 3	
+ 20
Michigan 	
+ 12	
+24
Wisconsin	0	– 3
Seventh District	+4	
+15

VI
– 4
– 6
+1
+6

II

I
+2
+16

+3
+20

+9
III +27

*
VII
+7
+3

IV

XIV

*

X
+4
+19 VIII

V
– 2

*

+23

*Insufficient response.

XII

IX
+11
+31

XV

+2
+15

XI
+4
+17

XVI

+4
+16

adjusted for inflation using the Personal Consumption
Expenditures Price Index (see chart 1); this result was the
fourth-largest increase in farmland cash rental rates in
the history of the survey.

1.	 Annual percentage change in Seventh District farmland
	 cash rental rates adjusted by PCEPI
percent
20

The string of strong advances in farmland cash
rental rates propelled their inflation-adjusted index past
its previous peak (see chart 2). Similarly, the index of agricultural land values has established new records every
year since 2011. Historically, changes in cash rental rates
have tended to trail those in farmland values, so not surprisingly, the equity derived from the land outpaced the
income from cash rents in 2013.

10

0

−10

−20
1981

’85

’89

’93

’97

2001

’05

’09

’13

Sources: Author's calculations based on data from Federal Reserve
Bank of Chicago farmland value surveys; and U.S. Bureau of Economic
Analysis, Personal Consumption Expenditures Price Index (PCEPI), from
Haver Analytics.

quarterly and year-over-year gains in agricultural land
values masked the weaker results of some areas (see table
and map on front page). Most notable was a 3 percent drop
in Wisconsin’s farmland values in the first quarter of 2013
from a year ago. That said, the year-over-year and quarterly
gains in agricultural land values for Michigan were higher
than the strong gains of the previous quarter. For Illinois
and Iowa, the increases in farmland values on a year-overyear basis were close to those of the previous quarter, although these District states’ quarterly increases were softer
than those of the last quarter.
There was higher demand to purchase farmland in
the three- to six-month period ending with March 2013 compared with the same period a year ago; 59 percent of the
survey respondents observed higher demand to purchase
farmland, while only 1 percent observed lower demand.
The supply of farmland was higher too: There was an increase in the amount of farmland for sale over the winter
and early spring relative to a year ago, as 37 percent of the
responding bankers reported more farmland was up for
sale in their areas and 28 percent reported less. Similarly, the
number of farms and amounts of acreage sold increased over
the winter and early spring relative to a year ago. A little
over one-third of survey participants reported that farmers
increased their share of farmland acres purchased (relative
to investors) in the three- to six-month period ending in
March 2013 versus the same period a year earlier; 3 percent
said farmers decreased their share; and 62 percent saw
no change.
District cash rental rates for agricultural land in 2013
were up 11 percent from 2012 (this annual increase was
smaller than those of the past two years). Over the same
period, farmland cash rental rates were up 9 percent in
Illinois, 11 percent in Indiana, 13 percent in Iowa, 2 percent
in Michigan, and 12 percent in Wisconsin. District cash
rental rates increased almost 10 percent from 2012 when

Rising cash rental rates and farmland values reflected
higher crop prices. Prices in the first quarter of 2013 averaged $7.06 per bushel for corn and $14.47 per bushel for
soybeans, according to the U.S. Department of Agriculture
(USDA). In the first quarter of 2013, corn prices and soybean prices increased 2.5 percent and 1.4 percent, respectively, from the fourth quarter of 2012; corn prices grew
13 percent and soybean prices grew 17 percent compared
with a year ago, as tight stocks and uncertainty about the
weather boosted prices. Moreover, at the end of the first
quarter of 2013, $16.1 billion had been paid out for insured
2012 agricultural losses across the U.S., of which $6.66 billion
went to producers in the five District states (41 percent of
the U.S. total). These factors bolstered farmland values
and cash rents while enhancing agricultural credit conditions in the first quarter of 2013.

Credit conditions
Agricultural credit conditions improved in the first quarter of 2013 compared with the first quarter of 2012. At 161,
the index of funds availability nearly matched last year’s
record, with 61 percent of the survey respondents reporting their banks had more funds available to lend and under
1 percent reporting their banks had less. The index of
repayment rates for non-real-estate farm loans moved up
2.	Indexes of Seventh District farmland adjusted by PCEPI
index, 1981=100
200

150
Farmland
values
100
Cash
rental rates
50

0
1980

’83

’86

’89

’92

’95

’98

2001

’04

’07

’10

’13

Note: Both series are adjusted by PCEPI for the first quarter of each year.
Sources: Author's calculations based on data from Federal Reserve
Bank of Chicago farmland value surveys; and U.S. Bureau of Economic
Analysis, Personal Consumption Expenditures Price Index (PCEPI), from
Haver Analytics.

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

		
2011
	Jan–Mar	
	Apr–June	
	July–Sept	
	Oct–Dec	

(index)b	(index)b	(index)b	

(percent)	

(percent)	 (percent)	(percent)

81	
79	
81	
87	

149	
145	
149	
153	

146	
133	
133	
150	

69.8	
70.3	
69.0	
68.7	

6.01	
5.75	
5.66	
5.47	

5.93	
5.91	
5.79	
5.65	

5.80
5.62
5.36
5.20

2012
	Jan–Mar	
	Apr–June	
July–Sept	
	Oct–Dec	

72	
69	
81	
96	

163	
164	
147	
151	

154	
139	
128	
135	

66.5	
68.1	
67.5	
67.2	

5.34	
5.27	
5.21	
5.03	

5.54	
5.41	
5.37	
5.24	

5.08
4.94
4.86
4.70

2013
	Jan–Mar	

67	

161	

143	

63.7	

4.91	

5.12	

4.60

At end of period.
b
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

to 143 for the first quarter of 2013—its highest value since
setting a new high a year ago; 47 percent of the responding
bankers reported higher rates of repayment and 4 percent
reported lower rates. Thirty-five percent of the survey respondents observed fewer loan renewals and extensions
over the January through March period of 2013 compared
with the same period last year, while 5 percent observed
more of them.
The index of demand for non-real-estate farm loans
dropped to 67—its lowest value since 1986. Only 13 percent of the reporting bankers noted higher loan demand
compared with a year ago, and 46 percent noted lower
demand. Low loan demand led to a decline in the average
loan-to-deposit ratio for the District. At 63.7 percent, the
District’s average loan-to-deposit ratio had fallen to its lowest level since 1994, and this level was 13 percentage points
below the average level desired by District bankers. Furthermore, the share of banks below their desired level of
lending rose to 89 percent. Six percent of the survey respondents reported that their banks required larger amounts
of collateral for loans during the January through March
period of 2013 relative to the same period last year, while
only 1 percent reported that their banks required smaller
amounts. As of April 1, 2013, average interest rates had
fallen to 4.91 percent for operating loans and 4.60 percent
for agricultural real estate loans; both were record lows.

Looking forward
Heavy precipitation has delayed planting this spring, in
sharp contrast with last year, when planting occurred ahead
of schedule. That said, the rains have revitalized much of
the subsoil. During last year’s drought, subsoil moisture
played a key role in preventing even deeper losses in agricultural output. Similar to a year ago (before the drought
hit), the USDA recently forecasted an easing of tight crop
stocks because of the anticipated record harvests of corn

and soybeans this fall; according to the USDA, this record
production should lead to lower estimated price intervals
for the 2013–14 crop year: $4.30 to $5.10 per bushel for corn
and $9.50 to $11.50 per bushel for soybeans. Lower crop
prices could slow the upward trend in farmland values.
Many District bankers responding to the survey appeared
to share this view: For the second quarter of 2013, 19 percent
predicted farmland values to increase, while 4 percent
expected them to decrease; the vast majority anticipated
farmland values to be stable.
Non-real-estate farm loan volumes were projected
by survey respondents to decrease during the April
through June period of 2013 compared with the same period of 2012, except in Indiana and Wisconsin. However,
agricultural real estate loan volumes were expected to
rise in the second quarter of 2013 compared with the second quarter of 2012 for all District states.
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.
© 2013 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
	
	
	
	

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

Percent change from
Latest		
Prior	
Year	
Two years
period	
Value	 period	ago	 ago
April	
189	 6.4	6	7
–  
April	
218	 9.2	4	8
–  
April	 6.67	 7.1	5	5
–  
April	
200	 2.0	 4	40
April	 14.20	 2.1	3	8
–  
April	
7.52	
–  1.8	
6	
–  6
April	
163	 1.2	7	4
–  
April	
61.00	
2.0	
–  3	
–  11
April	 128.00	 0.0	0	5
April	
19.30	
1.0	
15	
–  2
April	
0.88	
–  23.3	
2	
–  16
March	
March	

232	 0.2	1	4
–  
236	 0.0	2	5

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.)*	

March 1	
March 1	
March 1	
March	
March	
March	

5,399	
999	
1,234	
2.04	
1.93	
16.4	

N.A.	
N.A.	
N.A.	
8.8	
8.7	
12.3	

–  10	
–  27	
3	
–  6	
–  3	
–  1	

–  17
–  20
–  13
–  10
–  6
4

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

March	
March	
March	
March	

11,682	
68	
68	
102	

–  6.5	
23.6	
–  53.6	
11.9	

–  2	
–  49	
–  42	
17	

–  12
–  60
–  45
–  16

Farm machinery (units) 						
	 Tractors, over 40 HP	
April	 9,551	 N.A.	 9	14
		 40 to 100 HP	
April	
5,158	
N.A.	
–  4	
7
		 100 HP or more	
April	 4,393	 N.A.	30	25
	Combines	
April	
920	 N.A.	59	21
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.