Lower crop prices are providing some boost to US farmland
prices by lifting sentiment among livestock and dairy producers, offsetting some
of the depressant effect on sentiment in the cropping sector.
The Federal Reserve's Chicago bank reported a small recovery
in the pace of quarter-on-quarter land price appreciation in its region, which
includes the key Corn Belt states of Illinois, Indiana and Iowa, plus Michigan
and Wisconsin too.
After falling 1% over the January-to-March period, prices
rose in the April-to-June quarter, albeit by a modest 2%.
The performance in the "I" states, renowned as top corn and
soybean growers, was mixed.
Indiana prices fell for two successive quarters for the
first time in 27 years.
However, for Wisconsin, renowned for its dairy industry,
prices grew by 6%, up from 1% growth in the January-to-March period.
"Profitability in the livestock sector served to counteract
some of the weakness in the crop sector" in the region's land market, the
Chicago Fed said.
Lenders surveyed for the data highlighted that "the improved
bottom line for dairy operations corresponded with a boost in demand for
farmland in some areas.
"The surge in dairy farming profits was consistent with
Wisconsin's 6% jump in quarterly farmland values."
US milk prices have failed to follow values abroad into a
deep decline, as highlighted by Dean Foods earlier this week, and defending the
boost to dairy producers' margins from lower feed prices.
The comments came in the third of the major quarterly Federal
Reserve reports on US farmland values for the April-to-June quarter, with the
Kansas City bank also having noted a trend of faster price appreciation for
ranchland than cropland.
"Current trends in farmland values were expected to continue
for the rest of the growing season with cropland values holding at high levels
and ranchland values rising further," the Kansas City Fed added, based on
comments from lenders in its area which includes Kansas, Oklahoma and Nebraska.
The Chicago Fed said that its research "indicated weakness
in agricultural land values in the coming quarters," with 30% of lenders it
surveyed expecting a decline, compared with 2% seeing a rise, and the balance
of 68% predicting a flat market.
"Farmland values may already have plateaued," the bank said.