Wisconsin Ag Connection - Fed Survey: Wisconsin Farmland Values Rose Three Percent in '16

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Fed Survey: Wisconsin Farmland Values Rose Three Percent in '16
Wisconsin Ag Connection - 02/13/2017

For the third year in a row, Wisconsin outpaced the rest of its neighbors in the growth of farmland property values during the past year. According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, regional farmland values between October through December 2016 were down one percent from the three months previous; and dropped one percent for the year as a whole.

Wisconsin ag property increased by three-percent from last year, but fell two-percent lower compared to the previous quarter. The Badger State's annual increase has been trending at around two- to three-percent for each of the past four years.

The survey further noted that Michigan, Illinois and Iowa values fell for the year, while Indiana showed growth. None of the states recorded an increase in farmland values for the fourth quarter of 2016.

In the most recent questionnaire of 192 rural bankers, survey respondents said farmers in the region saw their corn and soybean prices continue to fall as record production and yields drove commodity values lower compared to previous years.

"The District experienced an annual decrease of one percent in good farmland values for 2016, marking the third year in a row of declines," said Reserve Economist David Oppedahl. "However, this stretch of decreases has been much more moderate than the previous such stretch during the 1980s. Also, the final quarter of 2016 was the tenth straight quarter without the district as a whole seeing a year-over-year increase in agricultural land values."

Oppedahl goes on to say that for 2017, 60 percent of the survey respondents expected farmland values to stablize during the first quarter of 2017, while the remaining bankers felt values will decrease in their local areas.

Meanwhile, non-real-estate farm loan renewals and extensions in the fourth quarter of 2016 were higher than in the fourth quarter of 2015, as 39 percent of respondents reported increases in them while only three percent reported decreases. Moreover, the volume of the farm loan portfolio deemed to have 'major' or 'severe' repayment problems grew to 5.9 percent in the fourth quarter of 2016, matching the share in 2002 and the highest such proportion in 15 years.

Looking ahead, banks are projecting that their farm customers with operating credit in 2016 were not likely to qualify for new operating credit during the new year. Bankers anticipated non-real-estate agricultural loan volumes to be higher during the first quarter of 2017 relative to the same quarter of a year earlier. Volumes for grain storage loans, farm machinery loans, feeder cattle loans, and farm real estate loans were forecasted to be lower in the January through March period of 2017 relative to the same period of 2016.

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