Farmland values in major US corn and soybean growing areas
may be poised for stability, even as values in the wheat belt face further
decline, after fall in some states at the fastest in 15 years, according to the
Farmland prices in major US agricultural continued to fall
in the last three months of 2016, depressed by the dent from weak crop prices
to farm finances, whose deterioration was also evident in weakened credit conditions,
data from the US central bank showed.
Values declined in the Midwest - best known for corn and
soybean production - after in many states, such as Indiana, showing some
resilience in the July-to-September period.
In the central Plains, the main hard red winter
wheat-growing area, values extended to 6% their drop, as measured by prices of
non-irrigated last, "the largest [fall] since the Great Recession of 2007-09",
the Fed said, terming the retreat a "slump".
In Kansas, the top wheat-growing state, values tumbled by
13%, while for ranchland, price decreases in Kansas, Nebraska and Missouri "were
the largest since 2002".
Wheat vs row crop
However, lenders surveyed by the central bank proved divided
in prospects for land prices this year.
In winter wheat country, as well as in the southern Midwest,
most bankers forecast further depreciation this year – potentially at a
In the central Plains, "a majority of bankers expected a
decline of 6-10% in non-irrigated farmland values by year-end 2017", the Fed
said, flagging a continued decline in incomes for the region's producers.
By contrast, in the Midwest, at nearly 60%, the proportion
of lenders surveyed by the bank expecting further price falls – at least during
the first three months of this year - exceeded the 40% forecasting a further
'Longest in history'
While the Fed did not elucidate on the reasons behind the
divergence in outlooks, it tallies with a differing narrative of farm incomes
between growers in wheat country, and in the corn and soybean belt.
In the central Plains, "farm income fell for the 15th
consecutive quarter, the longest such streak in survey history," the Fed said, noting
expectations of a further decline during the first three months of 2017.
However, in the northern Midwest, the bank flagged the
impact of last year's record corn and soybean harvests in "softening the slide
in farmland values".
Indeed, "even though plentiful supplies of corn and soybeans
exerted downward pressures on corn and soybean prices in 2016, reinvigorated
demand for these crops - particularly for export - helped allay fears of even
lower crop prices.
"Without a major hit to the returns of most farms in the district,
the downturn in agricultural land values didn't gain momentum in 2016."
'Tough year ahead'
The Fed's Chicago bank, which covers the northern Midwest,
highlighted comment from one lender surveyed that "last year 'ended much better
than expected', assisted by strong crop yields and some increases in product
prices from a year ago".
By contrast, the Kansas City Fed, covering the central
Plains, noted one banker from south west Kansas who said that "we have been
shoring up our lines with additional collateral where required payments have
"We are expecting a tough year ahead."