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Bank Survey: Midwest Farmland Values Hold Steady
USAgNet - 08/16/2019

According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, regional farmland prices were down one percent from mid-2018, but did not show much change during the spring and early summer months of this year.

In the most recent questionnaire of 157 rural bankers, survey respondents felt muted expectations for farm income continued to be a factor in sliding real farmland values.

"About 45 percent of the agricultural borrowers said their clients were modestly affected by bad weather conditions in the first half of the year and another 24 percent were significantly affected," said Reserve Economist David Oppedahl. "Borrowers in Illinois, Indiana, and Michigan faced the worst of the weather-related repercussions. So, corn and soybean yields are expected to drop this year to well below their long-term trends."

Wisconsin, Illinois and Indiana banks saw no change in its farmland values, while Iowa and Michigan farmers saw their values drop compared to last year.

The survey also indicated that repayment rates for non-real estate farm loans were lower in the second quarter than a year ago. In addition, loan renewals and extensions in the district were up from 2018.

"Agricultural credit conditions in the second quarter of 2019 deteriorated relative to a year earlier, continuing a pattern going back to the fourth quarter of 2013," Oppedahl said. "On the whole, district banks had less funds available to lend in the second quarter of 2019. Twenty five percent of the survey respondents reported that their banks required larger amounts of collateral than a year ago and none reported that their banks required smaller amounts."

Looking ahead, most of the bankers anticipated farmland values to remain stable in the short term. Most also projected volumes of non-real-estate farm loans to increase in the third quarter of this year.

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