Fed AgLetter Reports Midwest Farmland Values Continue to Rise in First Quarter

Chicago, IL — The Chicago Fed's AgLetter reports farmland values for the Seventh Federal Reserve District strengthened in the first quarter of 2021, rising 7 percent from a year ago.

Moreover, “good” farmland values moved up 3 percent from the fourth quarter of 2020 to the first quarter of 2021, according to the survey responses of 143 District agricultural bankers.

With the remarkable change in the District’s agricultural situation from a year ago, 74 percent of survey respondents anticipated farmland values to rise in the second quarter of 2021 and 26 percent anticipated them to be stable (none anticipated them to fall).

Annual cash rental rates for District farmland increased 4 percent in 2021, bucking the downward trend of the previous seven years.

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There was a lower amount of farmland for sale in the three- to six-month period ending with March 2021 than in the same period ending with March 2020.

The number of farms and the amount of acreage sold were also lower during the winter and early spring of 2021 compared with a year earlier, yet there seemed to be surging demand to purchase agricultural land.

In line with such demand, 74 percent of the responding bankers forecasted District farmland values to be higher during the second quarter of 2021, and the remainder fore- casted agricultural land values to be stable.

In a reversal from the first quarter of 2020, when the pandemic started to have negative impacts, District agricultural credit conditions improved during the first quarter of 2021.

Repayment rates for non-real-estate farm loans were up sharply from a year ago, and renewals and extensions of these loans were down.

The availability of funds to lend in the first quarter of 2021 was much higher than a year earlier, whereas demand for non-real-estate loans was lower than a year ago.

At 69.7 percent, the average loan-to-deposit ratio in the first quarter of 2021 was at its lowest level since the first quarter of 2015. On net, the amount of collateral required by banks across the District was little changed from a year ago.

In addition, average interest rates on farm loans edged down over the first quarter of 2021 from their al- ready low levels at the end of the fourth quarter of 2020.

To read the full report, click here.

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