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Bank Survey: WI Farmland Values Escalate During 2nd Quarter
Wisconsin Ag Connection - 08/12/2016

Wisconsin continues to outpace the rest of its neighbors in the growth of farmland property values. According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, state farmland values between April through June were up seven percent from a year ago, and rose five percent above the previous quarter. District wide, land values decreased one percent from the same three months compared to last year, but did move up one percent from the first quarter of 2016.

In comparison, the survey noted that Iowa, Indiana and Michigan values fell for the year, while Illinois' quarterly values rose by one percent.

"In the second quarter of this year, prices for corn and soybeans rallied again, which brightened outlooks in rural areas," said Reserve Economist David Oppedahl. "But the prices for these crops receded once again as the prospects of a record corn harvest and a near-record soybean harvest grew stronger. Only one percent of survey respondents expected farmland values to rise during the third quarter of 2016, while 48 percent expected them to move down and 51 percent expected them to be stable."

In the most recent questionnaire of 193 rural bankers, survey respondents said agricultural credit conditions in the second quarter were still weaker than a year ago. But Oppedahl says there were some signs of improvement from what had been observed in the previous two quarters.

"Repayment rates for non-real-estate farm loans softened relative to a year ago, but not by as much as during each of the prior two quarters," he noted. "Renewals and extensions of non-real-estate farm loans were above the level of the same quarter in the previous year, even as demand for non-real-estate farm loans was also above its level 12 months ago."

The survey made it evident that lower agricultural prices and an associated decline in farm earnings over the past two years have been a drag on farmland values. While the June bumps in corn and soybean prices provided an opportunity for some farmers to boost their revenues, they did not seem to alter the overall trend in farmland values.

Looking ahead, the bankers indicated that agricultural land values will likely fall further in the third quarter of 2016. Respondents anticipate higher non-real-estate loan volumes for agriculture as increases in the volumes of farm operating loans and loans guaranteed by the Farm Service Agency would more than offset decreases in the volumes for dairy, feeder cattle, farm machinery, and grain storage construction loans.

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