Wisconsin Ag Connection - Fed Survey: WI Farmland Values Up for the Year, But Drop in 3Q

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Fed Survey: WI Farmland Values Up for the Year, But Drop in 3Q
Wisconsin Ag Connection - 11/19/2018

None of the states within the Seventh Federal Reserve District saw their farmland rise in value during the third quarter of 2018, but Wisconsin had the biggest jump in values since this time last year. According to the latest survey of agricultural lenders in the district, ag property values were one percent lower between the months of July through September when compared to the quarter previous, but were one percent higher from the same time in 2017.

In the most recent questionnaire of 188 rural bankers, survey respondents noted that Wisconsin properties were up four percent from last year, though they did drop one percent from the second quarter. Farmland in Iowa and Indiana was up just one percent for the year, but Illinois farmers saw a slight decrease in the values of their ag property. Michigan trends were not calculated due to the lack of adequate survey responses.

"This was the first quarterly decline for district agricultural land values since the fourth quarter of 2016 nearly two years ago," said Reserve Economist David Oppedahl. "Almost two-thirds of survey respondents expected the district's farmland values to be stable during the fourth quarter of 2018, but 32 percent of them expected a decrease in farmland values in the final quarter of this year and only two percent expected an increase."

He says agricultural credit conditions in the district continued to deteriorate. For the fifth consecutive quarter, the availability of funds for lending by agricultural banks was down relative to a year ago.

"Yet, for the third quarter of 2018, the demand for non-real-estate farm loans was higher than a year earlier," he said. "These results helped explain how the average loan-to-deposit ratio for the District established a new record of 79.4 percent. Moreover, repayment rates for non-real-estate farm loans were lower in the third quarter of 2018 relative to the same quarter last year, and loan renewals and extensions were higher."

In addition to difficult weather conditions and lower farm product prices, key livestock prices were also off during the summer months of 2018--with cattle, hog and milk down 2.6 percent, 17 percent and 9.8 percent in the third quarter, respectively.

Looking ahead, survey results indicated that a majority of the respondents expected farmland values to remain stable in the fourth quarter. But they also felt that demand for farmland purchases by both farmers and nonfarm investors will be weaker this fall and winter compared with a year ago.

The bankers also expressed the opinion that loan repayment rates would likely decline this fall and winter from a year ago due to a weak farm economy.

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