Banker Survey: Midwest Farmland Values Still Simmering Down Wisconsin Ag Connection - 09/01/2009
The value of farmland in the upper Midwest appears to be lower for the second consecutive quarter. According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, farmland values between April through June 2009 were down three-percent from a year ago; but there was no change in the value of 'good' agricultural land during the three-month period compared to the same time in 2008. The previous report from the fed, released in May to reflect the first three months of the year, indicated a quarterly decrease of six percent in the value of good agricultural land--which was the largest quarterly decline since 1985.
In the most recent questionnaire of 219 rural bankers, survey respondents noted that there was a 'marked deterioration' in agricultural credit conditions during the second quarter of 2009. As a result, all farmland values in Iowa and Michigan lost the most ground, at five percent each, while those in Illinois and Wisconsin fell two percent. Only Indiana seemed to maintain farmland values above the level of a year ago. For 'good' farmland, Iowa and Wisconsin experienced quarterly increases of one percent, whereas Michigan had a one percent decline. Illinois and Indiana farmland values were flat for the second quarter of 2009.
Reserve Economist David Oppedahl says agricultural credit conditions in the district--which include portions of Wisconsin, Iowa, Illinois, Michigan and Indiana--worsened during the second quarter of 2009.
"There was a drop in repayment rates for non-real-estate farm loans from April through June compared to the previous year," Oppedahl said in his quarterly report. "The index of loan repayment rates slid to its lowest level since 2006 at 93, with 15 percent of the responding bankers reporting higher rates of loan repayment and 22 percent reporting lower rates. Loan repayment rates would have been about fl at, had it not been for the impact of Wisconsin, where 55 percent of the bankers noted lower rates and only three percent higher."
He also noted that Wisconsin, with its struggling dairy sector, was in worse shape than the rest of the district, at six percent of loans being classified as 'troubled.'
As for the future, the ag bankers say they expect farm loan volumes at their banks to decline for the third quarter of 2009. About 20 percent of the bankers forecasted farm non-real-estate loan volume to be higher from July through September relative to the same period in 2008, whereas 30 percent forecasted lower volume. Operating loans and loans guaranteed by the Farm Service Agency were the only categories anticipated to experience growth in volume during the third quarter of 2009.
