George C. Ford, CR Gazette –
The average value of good farmland in Iowa and surrounding states rose 22 percent in 2011, the highest rate of increase since 1976, according to a report Friday from the Federal Reserve Bank of Chicago.
Iowa farmland values rose 28 percent from Jan. 1, 2011, to Jan. 1, 2012, primarily driven by high commodity prices and lack of alternative investments in the volatile equity markets. Indiana farmland values rose 27 percent for much the same reasons, according to the Fed.
With an annual increase of 22 percent in the value of good farmland in 2011, the Seventh Federal Reserve District not only experienced dramatic land auctions, but also saw the biggest boom of the past 35 years. After adjusting for inflation, the 2011 annual increase in farmland values (19 percent) was still the largest since 1976.
Farmland values rose 4 percent in the district in the fourth quarter of 2011, based on 205 surveys of agricultural banks in the district, which includes Iowa, Illinois, Indiana, Michigan and Wisconsin. More than 40 percent of the bankers surveyed expect continued farmland value gains during the first quarter of 2012.
Chicago Fed Economist David Oppedahl, who authored the report, said 2011 may go down in the annals of United States agriculture as a “once-in-a-generation phenomenon.”
“Undergirding the huge upward movement in farmland values was an unusual shift up in agricultural prices across the board,” Oppedahl said. “Not only did major crop prices move higher, but key livestock and dairy prices were higher as well.
“Corn, soybean, and wheat prices averaged 57 percent, 26 percent, and 45 percent, respectively, higher in 2011 than in 2010. Milk, hog, and beef cattle prices rose 23 percent, 21 percent, and 21 percent, respectively, although producers faced costlier feed as well.
“According to the most recent U.S. Department of Agriculture estimates, these agricultural price increases helped set a nominal record for net farm
income of $98.1 billion in 2011, a 24 percent jump above 2010 levels.”
While memories of the 1980s farm crisis has prompted concern about the financial status of farmers, Oppedahl said the percentage of problem loans
declines in all shrank in all five states from a year earlier.
“Less than 2 percent of the volume of the farm loan portfolio held by reporting banks was considered as having major or severe repayment problems,” Oppedahl said. “Iowa and Wisconsin banks had larger shares of problem loans than the other states, possibly reflecting higher concentrations of animal agriculture (hogs in Iowa and dairy in Wisconsin).”
