Christopher Doering, cdoering@gannett.com 2:51 p.m. CDT May 16, 2014
After several years of rapid growth, farmland values fell in the Midwest during the first quarter of 2014 as lower commodity prices tempered purchases by farmers, according to a series of reports released by the Federal Reserve.
The Federal Reserve of Chicago, which includes Iowa, Michigan and parts of Illinois, Wisconsin and Indiana, found farmland values declined 1 percent in the first quarter of the year compared to the final three months of 2013, marking the first decline in five years. Prices in Iowa - the largest corn and second-biggest soybean producer - bucked the decline over the bank's region, rising a modest 1 percent.
The Chicago Fed said lower farm income from crop operations is expected to be partly offset by improvements in livestock, where operations are benefiting from cheaper feed prices. Almost three-quarters of the survey respondents predicted stable farmland values during the second quarter of 2014, while 24 percent expected them to decrease.
Justin Dammann, a southwestern Iowa farmer who raises corn, soybeans and cattle, said land prices today reflect record-high commodity prices, like $8-a-bushel corn, and haven't been adjusted to reflect the decline. Corn traded at about $4.80 a bushel on Friday. While Dammann said he hasn't purchased farmland in more than a year, he remains on the lookout for new property if he can get it at a bargain price.
"We're always looking at buying farmland, but it's too high. It looks like you're just going to have to be patient," said Dammann, who is planting 4,000 acres of corn and soybeans this year. "There is still a lot of money that is looking for a home and it has made this land kind of stay up."
Crop farmers have seen their income squeezed as prices for corn and soybeans, the major crops grown in the Midwest, have fallen sharply. According to the Agriculture Department, corn prices were down 37 percent and soybean prices were down 8.5 percent in the first quarter of 2014 from a year ago, following a strong harvest in 2013 that helped reduce low crop stockpiles decimated from the drought-stricken 2012 growing season.
Record-high grain prices in recent years have helped boost cash-coffers for many farmers – money they used to buy new equipment and land.
The USDA has estimated farm income will plunge almost 30 percent in 2014, to $96 billion. Despite the decline, the farm economy will remain historically strong with 2014 net farm income the seventh highest since 1973 after adjusting for inflation, and $8 billion higher than the average of the previous 10 years.
A pair of other Federal Reserve Reports this week showed the impact falling commodity prices are having on land values.
In the district overseen by the Federal Reserve of St. Louis, including part of Illinois, average prices for agricultural land dropped 6 percent in the first quarter from the prior three months. Meanwhile, the Federal Reserve Bank of Kansas City, which oversees Kansas, Nebraska and Colorado, among other states, said the value of non-irrigated farmland dipped 1.4 percent.
"Expectations of lower profits for crop producers have generally halted the rise in District cropland prices," economists from the Kansas City Fed said in their report. "Some bankers expected additional easing in cropland values in the next three months