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Wisconsin Farmland Values Were Up From Last Year
Wisconsin Ag Connection - 05/16/2016

Wisconsin continued to outpace the rest of its neighbors in the growth of farmland property values during the past year. According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, farmland values in the upper Midwest between January through March 2016 were down four-percent from a year ago; and was one-percent lower compared to the previous quarter. However, Wisconsin ag property increased by one-percent from last year (the only state that had positive growth), but did fall two percent from the fourth quarter of 2015.

In comparison, the survey noted that Iowa, Illinois, Indiana and Michigan values fell for the year, but Indiana's quarterly values did rise by four percent.

In the most recent questionnaire of 200 rural bankers, survey respondents indicated that the region saw its largest year-over-year decline since the third quarter of 2009.

"Cash rental rates for district farmland experienced a significant drop of 10 percent for 2016 compared with 2015, even larger than the decrease of last year relative to 2014," said Reserve Economist David Oppedahl. "Moreover, the amount of farmland for sale, the number of farms sold, and the amount of acreage sold were all down during the winter and early spring of 2016 compared with a year ago."

He adds that nearly two-thirds of the responding bankers expected farmland values to decrease during the second quarter of this year, with the rest expecting farmland values to remain stable.

Meanwhile, agricultural credit conditions also deteriorated further during the first quarter of 2016. Oppedahl says repayment rates for non-real-estate farm loans were much weaker than a year ago, and renewals and extensions of these loans were much higher than a year earlier. In the first quarter, demand for non-real-estate loans was significantly higher than in early 2015, while the availability of funds to lend was slightly higher than a year earlier.

Rising to its highest point since 1979, the index of demand for non-real-estate farm loans was 156 for the first quarter of 2016. Sixty-four percent of the responding bankers observed higher loan demand in the January through March period of 2016 compared with the same period of a year ago, and only eight percent observed lower demand.

"Not surprisingly, the declines in crop prices of recent years seemed to lower farmers' expectations for turning a profit on leased acres in 2016," Oppedahl noted. "Compared with two years earlier, corn prices were down 21 percent and soybean prices were down 38 percent in March 2016. Real March corn prices have not been lower since 2006; similarly, real March soybean prices have not been lower since 2007."

Looking ahead, about two-thirds of the bankers predicted farmland values to decrease in the second quarter of 2016 and none expected farmland values to rise. Furthermore, farm real estate loan volumes were projected to be down in the second quarter of 2016 compared with the second quarter of 2015. Survey respondents forecasted higher volumes of non-real-estate farm loans for the April through June period of 2016 compared with the second quarter last year. Specifically, they expected higher volumes for operating loans, dairy loans, and loans guaranteed by the Farm Service Agency of the USDA.

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