FARMLAND values in Iowa and states surrounding Lake Michigan saw their first quarterly decrease in a decade, according to the Chicago Federal Reserve Bank.
The quarterly decline was only the second since 1986 for overall land values in the Fed's seventh district, which encompasses most or all of Iowa, Wisconsin, Illinois and Indiana.Prices for "good" agricultural land in the Fed's seventh district did see a 5 per cent increase for the year, but that was the lowest increase since 2001, said AgLetter author David B. Oppedahl, a Chicago Fed business economist.
Given a gloomy economic outlook, 35 per cent of respondents to the Fed's survey expected land values to decrease through March 2009. Only 4 per cent expected an increase, while 61 per cent of respondents expected the values to remain stable.
Among the conditions fueling respondents' sentiment, Oppedahl listed the 11.5 per cent decrease in estimated value of crop production in 2009 from the year prior, in which crop value grew 21 per cent year-over-year. In 2009, the value of livestock production is projected to fall to US$132 billion from US$143 billion in 2008.
Net farmer income for 2009 is seen at US$71.2 billion, down 20.3 per cent from the year prior, Oppedahl said, citing US Department of Agriculture data.
But the news was not all negative for farm country.
Despite 22 per cent of respondents increasing the amount of collateral required for agricultural loans in the fourth quarter of 2008, increases in loan volumes were forecast for operating loans, farm machinery loans, and loans guaranteed by the Farm Service Agency.
Loan repayment rates in the fourth quarter of 2008 improved from a year ago, survey respondents said.
Still, 19 per cent of respondents expected the volume of agricultural real estate mortgages to shrink, the AgLetter said. Those expecting higher real estate loan volumes totaled 15 per cent.
Volume decreases were also anticipated for feeder cattle, dairy, and grain storage construction loans, Oppedahl said.
-By Rebecca Townsend, Dow Jones Newswires
