New Farmland Price Updates From the Midwest — First Quarter 2012 3 Replies 1. From the Federal Reserve Bank of Kansas City 1st Quarter 2012 — Report By Jason Henderson and Maria Akers. (This district includes the northern portions of Illinois and Indiana, southern Wisconsin, the Lower Peninsula of Michigan, and the state of Iowa.) I have chosen some key points from this report in the bullets below: First-quarter ranchland values climbed higher, jumping 16 percent above year-ago levels. For the first time since the survey began in the late 1970s, the annual value of District cropland rose more than 20 percent for two consecutive years. Farm credit conditions strengthened further in the first quarter while demand for farm loans dwindled. Several bankers noted some farmers were converting pasture ground to row crops when feasible. The index of farm loan demand fell to its lowest level since the late 1980s. Compared with the fourth quarter of 2011, the value of nonirrigated and irrigated cropland in the District surged by 8 and 9 percent, respectively. Ranchland values also shot up in the first quarter, appreciating more than 7 percent since the end of last year. The value of nonirrigated cropland rose 25 percent above year ago levels in the first quarter of 2012, on top of the more than 20 percent gain posted in 2011. The value of irrigated acreage vaulted more than 30 percent higher than a year ago, a new survey high. Nebraska once again led farmland value gains for the District, followed by Kansas. Selected quotes from the districts area bankers: “There is more liquidity in the farm sector than I have seen in my 30 years as a banker.” —Northeast Kansa “Land prices are higher and more buyers are out-of-town investors.” —Southeast Wyoming “Pasture that could potentially be tilled is bringing significantly higher prices.” —Southeast Nebraska 2. From the Federal Reserve Bank of Chicago 1st Quarter 2012 Report on Farmland and Credit Conditions in the 7th District — by David B. Oppedahl (This district includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico.)To follow are the highlights that I’ve selected from the Chicago report: There was a 19 percent year-over-year increase in the first quarter of 2012. The quarterly increase in agricultural land values for the District was 5 percent—in line with the gains of the past year and a half. The demand to purchase farmland in the six months ending with March 2012 was higher relative to that in the six months ending with March 2011. Additionally, the number of farms sold, acreage sold, and the amount of farmland for sale over the winter and early spring rose more sharply than a year ago. Farmland values in Iowa continued to lead the pack, with a year-over-year increase of 27 percent. On a year-over-year basis, “good” agricultural land values in Illinois, Indiana, Michigan, and Wisconsin were up 20 percent, 15 percent, 7 percent, and 13 percent, respectively. Relative to investors, farmers again purchased a higher share of the acres sold in the past three to six months, although investors were actively searching for properties across the District. Farmland cash rental rates in 2012 climbed 17 percent from 2011 for the District—the second-largest increase in the history of the survey. Cash rental rates for agricultural land went up 15 percent in Illinois, 15 percent in Indiana, 20 percent in Iowa, 12 percent in Michigan, and 19 percent in Wisconsin Based on the USDA index of prices paid by farmers, input costs for agriculture rose 6.6 percent through the first quarter of 2012 compared with the first quarter of 2011. Thus, with possibly lower revenues for several outputs and higher costs for inputs, agriculture faces a more challenging road to profits in 2012 than in 2011. The index of non-real-estate agricultural loan repayment rates climbed to its highest level in the survey’s history (154) for the first quarter of 2012, as 56 percent of the respondents noted higher rates of repayment and only 2 percent noted lower rates. Growth was forecasted in farm machinery, grain storage construction, and real estate loan volumes in the second quarter of 2012 compared with the second quarter of 2011. In both districts, there was some momentum to sell to take advantage of current high farmland prices, with more properties on the market. The last part that I thought was interesting was this data on machinery sales. Combines and the largest of tractor sales is down, presumably because some purchases were already made in the early part of this boom.