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Fed Survey: WI Farmland Values Trending Lower From Last Year
Wisconsin Ag Connection - 11/15/2019

None of the states within the Seventh Federal Reserve District saw their farmland rise in value during the third quarter of 2019 when compared to last year. According to the latest survey of agricultural lenders in the district, ag property values were one percent lower than the same period in 2018, but rose one percent between the months of July through September from the quarter previous.

In the most recent questionnaire of 170 rural bankers, survey respondents noted that Wisconsin properties were down two percent from last year, but remained flat since the second quarter. Farmland in Illinois also lost one percent in value, while Iowa and Indiana had no change for the year. However, those two states did show an up-tick in prices since the second quarter. Michigan trends were not calculated due to the lack of adequate survey responses.

"The district has not experienced a year-over-year change in its agricultural land values of greater than one percent over the past 12 quarters, which is an unprecedented streak of relative stability in farmland values," said Reserve Economist David Oppedahl. "Nevertheless, there was substantial variation in farmland value changes among the district's five states."

He says agricultural credit conditions in the district continued to deteriorate, as repayment rates for non-real-estate farm loans were down relative to the third quarter of 2018 and loan renewals and extensions were up.

"Also, for the first time since the second quarter of 2017, the availability of funds for lending by agricultural banks was up for a quarter relative to a year ago," he said.

In addition to difficult weather conditions and lower farm product prices, cattle prices were also off slightly during the summer months of 2019. Fortunately for Wisconsin dairy producers, milk prices began turning around during the second half of the year.

Meanwhile, stronger demand for non-real-estate farm loans compared with a year ago was exhibited in the third quarter--marking the 24th consecutive quarter (or six years in a row) with such loan demand.

Looking ahead, survey results indicated that a majority of the respondents expected farmland values to remain stable in the fourth quarter. But they also felt that demand for farmland purchases by farmers will be weaker this fall and winter compared with a year ago. The opposite could be true for nonfarm investors, who may be looking at agricultural land for purchase.

The bankers also expressed the opinion that loan repayment rates would likely decline this fall and winter from a year ago due to a weak farm economy.

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