Farmland values in major US agricultural states ended 2015 on a weak note, recording the worst declines on some measures not seen since the 1980s’ price slump – and with further losses seen likely, official data showed.
Much watched quarterly reports from the Federal Reserve on land prices showed values in its Chicago region, covering major Corn Belt states such as Illinois, Indiana and Iowa, shedding 3% last year.
The drop, which followed a 3% fall in 2014, represented the first period of back-to-back falls in annual land prices since the mid-1980s, towards the tail end of a six-year market slump during which regional values near-halved, in a correction fuelled by soaring US interest rates.
Prices in Iowa, the top US corn-producing state, have suffered particularly badly in the latest retreat, recording a third successive year of annual decline in prices, over which prices have dropped by more than 13%, the central bank data showed.
Biggest drop since 1987
Separately, the Fed’s Kansas City bank, which covers largely Plains states, such as major wheat producers Kansas and Oklahoma, also revealed an accelerated downturn in farm prices in its region.
Price change, as measured as the average for the October-to-December quarter compared with that a year before, hit a negative 3.7% for non-irrigated cropland, the fastest rate of decline since early 1987.
And ranchland prices, which rose 10% over 2014 amid buoyant livestock markets, retreated with cattle values.
“Growth in the value of ranchland stalled in the fourth quarter alongside sharp declines in cattle prices that persisted to the end of the year,” the bank said.
‘Effects of weakening farm income’
Indeed, the decline in land prices was attributed to the weaker returns both arable and livestock farmers are faced with, thanks to weaker agricultural commodity prices.
“Farmland values softened… as farm income continued to weaken,” the Kansas Fed said.
“The effects of weakening farm income continued to ripple through the farm economy.”
At the Chicago Fed, senior business economist David Oppedahl said: “The downturn in crop and livestock prices helped stretch the slide in agricultural land values for at least another year.”
Further falls ahead?
And lenders surveyed for the reports indicated that values were likely to continue to fall.
Mr Oppedahl said that 59% of lenders responding to the Chicago Fed survey expected land prices to fall further in the first three months of 2016, “and none anticipated them to rise”.
The Kansas City Fed report showed an even bigger proportion of bankers it talked to, roughly 80%, expecting a drop in values over the next year, although some 2% did forecast an increase in prices.
“More bankers expected further losses in the value of non-irrigated cropland” than in prices of irrigated crop land, or of ranchland, the bank added.
(Source – http://www.agrimoney.com/news/corn-belt-farmland-price-retreat-longest-since-1980s–9296.html