Chicago Fed AgLetter: Midwest Farmland Values Up Compared to 3Q Year Ago. Here's Why.

Chicago, IL — Farmland values for the Seventh Federal Reserve District were up 2 percent in the third quarter of 2020 from a year ago, given support from lower interest rates, additional government payments, and some rising agricultural prices.

However, values for “good” agricultural land in the District overall were the same in the third quarter of 2020 as in the second quarter, according to the 144 bankers who responded to the October 1 survey.

The vast majority of survey respondents (82 percent) anticipated the District’s farmland values to be stable during the fourth quarter of 2020.

Yet, notably, more of them anticipated an increase in District farmland values in the final quarter of this year than anticipated a decrease.

The District’s agricultural credit conditions were mixed during the third quarter of 2020. The availability of funds for lending by agricultural banks was much higher in the third quarter than a year ago, but the demand for non-real-estate farm loans was lower than a year earlier for the first time in seven years.

Given these results, the average loan-to-deposit ratio for the District dropped to 75.0 percent in the third quarter of 2020.

Repayment rates for non-real-estate farm loans were still down relative to the same quarter of the previous year (and loan renewals and extensions were up), yet the pace of the deterioration slowed.

As mentioned earlier, average interest rates on agricultural loans slid further during the third quarter of 2020, which helped boost agricultural land values.

To read the full report, click here.

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