Banker in Farmland Survey Reports that the Big are Getting Bigger

Last year’s drought, the worst in the Midwest since 1988, did not deter farmland price appreciation in 2012.

Tenth District
In the 4th Quarter of 2012, irrigated farmland jumped 13 percent in the Federal Reserve Bank of Kansas City’s District which includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico and the western third of Missouri.

Cash rental rates for irrigated cropland went up 20 percent from a year ago. Irrigated cropland values rose more than 30 percent from a year ago in Nebraska, Kansas, and the Mountain States.

Both irrigated and non-irrigated cropland values posted year-over-year gains of more than 20 percent for the seventh consecutive quarter.

Seventy-four percent of the farmland purchases in 2012 in the Tenth District were made by farmers. The remainder were made by investors, recreational land purchasers, and buyers of development land.

But, rapid price appreciation in farmland prices is nothing new lately.

I found the most interesting part of the report to be the included bankers’ statements. (The survey included 232 banks.) Incidentally, this isn’t the first banker survey report comment about the big getting bigger.

“Many young farmers have difficulty purchasing real estate at these higher prices.” –Southeast Colorado

“Real estate remains very much in demand. We are now seeing more equity financing.” –Southwest Nebraska

“Almost all recent auctions were sold to the largest farmers in the area wanting to get bigger. The buyers are strong and most are cash sales.”–Northwest Missouri

“Crop insurance checks are a big part of financial statements in this area.” –Northeast Nebraska

“Most agriculture customers are just trying to maintain what they currently have and are not taking on additional debt or expanding their operations.” –
Southeast Colorado

“Lenders are competing hard for good loans.” –Eastern Kansas

“Pasture conditions are very poor and livestock producers will continue to struggle without significant rainfall.” –Southwest Kansas

Seventh District
And from the Seventh District, the Federal Reserve Bank of Chicago reported the highest farmland price appreciation in 35 years for last year, up 14 percent after adjusting for inflation. The Seventh Federal Reserve District is made up of five states, which include all of Iowa, and most of Illinois, Indiana, Michigan and Wisconsin.

To follow are a few interesting statistics included in the Seventh District’s report:
  • The price of hay is up 71 percent from two years ago.
  • The amount of corn exported by volume is down 66 percent from two years ago; wheat
      exports are down 27 percent from two years ago.
  • Sales of tractors over 100HP are up 30 percent over two years ago; combines up 47 percent.

Agricultural loan interest rates are the lowest in the history of the district’s survey.

Forty-three percent of the responding bankers anticipating higher levels of land purchases or improvements in 2013 than in 2012. This appears justified by the USDA’s prediction that net farm income will rise 14 percent from 2012 to $128.2 billion in 2013.

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