Growth in cropland values stagnated in the US winter wheat
belt, underperforming a rise in ranchland prices, while extending a decline in
the Corn Belt, where lenders are braced for a further falls.
The Federal Reserve, the US central bank, said that cropland
values in central Plains winter wheat states such as Kansas, Oklahoma and Nebraska
"generally held steady" in the April-to-June period.
The rate of appreciation came in at less than 1% quarter on
quarter, with the rate of year-on-year price rises coming in at 6% for both
irrigated and non-irrigated land.
For watered land, this represented the slowest rate of annual
price growth in four years, and came as rains replenished soil moisture after
longstanding droughts in Kansas and Oklahoma, reducing the advantage of irrigation.
Cropland vs ranchland
It was ranchland, which has lagged cropland in price growth
over most of the last seven years, which showed the strongest appreciation this
time, with values rising by more than 2% quarter on quarter and by a little
more than 9% year on year.
The trend of ranchland outperformance, supported by a rise
in cattle prices to record highs as better pasture condition encourages herd
rebuilding, looks set to continue.
"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 Fed said.
However, separately, the Fed's St Louis bank, which covers
parts of major row crop states such as Illinois, Indiana and Missouri, reported
falls in values of both pasture and higher quality land.
The price of so-called "quality" land averaged $5,473 per
acre, down 0.4% quarter on quarter and by 3.5% year on year.
For ranchland, the rate of decline came in at 7.4% quarter
on quarter, and by 2.5% year on year.
However, looking ahead bankers surveyed for the St Louis Fed
report were evenly split on prospects for values of ranchland or pastureland,
but showed a small majority forecasting a drop in prices of quality land.
Impact of crop price
The data come amid increasing evidence of low crop prices
taking a toll on growers' profitability, and therefore on their willingness to spend,
with machinery group Deere & Co on Wednesday cutting its profits target
because of soft demand.
The Kansas City Fed reported that while credit conditions at
agricultural banks "remained sound", it highlighted some signs of weakening
"Following the sharp drop in crop prices in late 2013, some
bankers noted a dip in farm loan repayment rates," the bank said.
"The largest declines have been in states heavily dependent
on crop production, particularly Nebraska."