Wisconsin Ag Connection - Bank Survey: Wisconsin, Midwest Farmland Values Soaring

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Bank Survey: Wisconsin, Midwest Farmland Values Soaring
Wisconsin Ag Connection - 08/13/2021

All of the states within the Seventh Federal Reserve District saw their farmland rise in value by double-digits during the second quarter of 2021 when compared to last year. According to the latest survey of agricultural lenders in the district, ag property values were 14 percent higher than the same period in 2020--the largest such gain in eight years. And they rose by three percent between the months of April through May over the previous quarter.

In the most recent questionnaire of 152 rural bankers, survey respondents noted that Wisconsin properties were up 13 percent over last year, but were unchanged since the first quarter. Farmland in Illinois and Indiana were 12 percent higher, while Iowa's went up by 18 percent for the year. Michigan trends were not calculated due to the lack of adequate survey responses.

"Nearly three-fourths of the survey respondents indicated that the Covid-19 pandemic had some negative impacts in the rural areas served by their respective banks over the past year. Yet, only around one-third of their farm customers were negatively affected by the pandemic over the same time frame," said Reserve Economist David Oppedahl. "These results were much better than those of similar survey questions asked a year ago. The remarkable recovery for farm borrowers was assisted by rising product prices and federal government funds allocated for agriculture."

Oppedahl adds that by the end of July 2021, the Coronavirus Food Assistance Program had dispersed over $5.7 billion to farm operations in the five states of the District, while additional resources flowed to agriculture through the Paycheck Protection Program.

"In the second quarter of 2021, repayment rates for non-real-estate farm loans dramatically improved from the same quarter of the previous year," he said. "The portion of the district's agricultural loan portfolio reported as having major or severe repayment problems had not been lower in the second quarter of a year since 2014."

In addition, corn and soybean prices have been supported by tight stocks, higher levels of exports during the pandemic, and concerns about the impact of drought on yields in the western Corn Belt. The USDA forecasted prices for the 2021-22 crop year of $5.60 per bushel for corn and $13.70 per bushel for soybeans. When calculated with these prices, the projected revenues from the 2021 U.S. harvests relative to revenues from the previous year's would be 29 percent larger for corn and 50 percent larger for soybeans.

Looking ahead, bankers indicated that the trends of the past quarter are expected to continue well into the remainder of the year. About 70 percent of survey respondents anticipated farmland values to rise in the next three month, while 30 percent thought they would stabilize.

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