There’s a lot to take in from the latest survey of agriculture lenders in the Upper Midwest.
The Seventh Federal Reserve District surveyed 136 agriculture lenders about trends they’re seeing in 2022 and all arrows point to higher farmland values. Overall, farmland values went up 23% compared to a year ago with an escalation of 4% in just the first quarter of 2022. There’s more information to be mined from the survey.
With demand to purchase agricultural land up yet again this year, there was a larger amount of farmland for sale in the three- to six-month period ending with March 2022 than in the same period ending with March 2021. In addition, the number of farms and the amount of acreage sold were up during the winter and early spring of 2022 compared with a year earlier. Given these upward trends, 48 percent of the responding bankers forecasted District farmland values to be higher during the second quarter of 2022, 51 percent forecasted them to be stable, and only 1 percent forecasted them to be lower.
Cash rental rates for District farm acres increased 11 percent from 2021 to 2022. For 2022, average annual cash rents for farmland were up 10 percent in Illinois, 11 percent in Indiana, 12 percent in Iowa, and 8 percent in Wisconsin (not enough survey responses were received from bankers in Michigan to report a numerical change for that state).
Farmland is getting more attention than equipment purchases according to lenders in the survey.
Agricultural credit conditions improved in the District during the first quarter of 2022. Repayment rates for non- real-estate farm loans were higher in the January through March period of 2022 compared with a year ago, and the renewals and extensions of these loans were lower. The availability of funds for agricultural borrowing in the first quarter of 2022 expanded from a year earlier, whereas demand for non-real-estate loans contracted. At 65.0 percent, the average loan-to-deposit ratio in the first quarter of 2022 was at its lowest level since the second quarter of 2013.
Looking ahead to the second quarter of 2022, 48 percent of survey respondents anticipated farmland values to rise, 51 percent anticipated them to be stable, and 1 percent anticipated them to fall. Another Illinois banker stated: “If commodity prices soften and interest rates continue to increase, a decline in real estate values would be anticipated.”