Chicago Fed reports limited growth in farmland values for Q2

The Chicago Federal Reserve reports increases in farmland values are starting to slow across the Midwest.

Policy advisor David Oppedahl tells Brownfield values in the second quarter were up nine percent from last year and had the smallest year-to-year gain since the beginning of 2021.

“We’re starting to see some tailing off from the very, very strong markets, but still not anything close to what we experienced say from 2014 through 2020,” he shares.

Indiana had the largest year-over-year growth in farmland values, up 23 percent.  Oppedahl says that is likely related to crop production optimism.

“There are some things happening outside of agriculture because they’ve got some big projects that are taking farmland and converting it into development for industry, so it’s certainly possible that that’s been a contributing factor as well,” he says.

Oppedahl says bankers expect the slowdown in farmland values to continue into the third quarter but anticipate an increased need for loans with lower commodity prices. He points to hog and milk prices which had the largest declines in the second quarter compared to last year, down 17 and 33 percent respectively.

“The areas that are of more concern probably are hogs and milk production because those areas see even bigger decreases in prices and it’s been extended, you know over a significant period of time now,” he says.

Oppedahl says credit conditions were also better than last year because interest rates in real terms have not been rising to levels prior to the pandemic. 

The share of farm loans with “major” or “severe” repayment problems in the district was the lowest ever reported for the second quarter. The Chicago Fed includes Illinois, Indiana, Iowa, Michigan, and Wisconsin.

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