Farmland Values, Federal Reserve Banks of Chicago and St. Louis, Updates
On Thursday, the Federal Reserve Bank of Chicago released its AgLetter report, which stated that, “The Seventh Federal Reserve District had an annual decrease of 3 percent in ‘good’ farmland values for 2014, marking the first yearly decline since 1986. However, farmland values in the fourth quarter of 2014 remained largely the same as in the third quarter, according to survey respondents from 224 agricultural banks across the District.”
The report explained that, “Moreover, the fourth quarter of 2014 was the first time since the third quarter of 2009 that the District suffered a year-over-year drop in farmland values. When adjusted for inflation, the District’s annual decrease in agricultural land values for 2014 was the first one since 1992; the streak of annual increases in District farmland values in real terms had reached 21 years before being broken in 2014. Still, at the end of 2014 the index of inflation-adjusted agricultural land values for the District was 68 percent higher than at its 1979 peak from the 1970s boom.”
The Chicago Fed noted that, “Lower corn and soybean prices have been primary factors contributing to the drop in farmland values. The impact of falling crop prices has been offset to some extent by buoyant returns for livestock producers through- out 2014. Nevertheless, the index of prices for livestock and associated products was down 5.2 percent in December from November (yet it was still up 13 percent from the previous December). The average price of milk in December was noticeably lower than the price in November, and even trailed the price from the previous December by 7 percent.
As livestock producers responded to price signals for expansion, the extra output contributed to a lowering of the prices received by producers, trimming their profits. There still seemed to be some lift to farmland values from livestock operations toward the end of 2014, yet the farm sector should be cautious about possible future impacts of these price trends, especially because feed costs may not get much (if any) lower.”
Also Thursday, in its Agricultural Finance Monitor, the Federal Reserve Bank of St. Louis stated that, “According to the survey responses from 39 agricultural banks in the Eighth District, farm income, farm household spending, and capital equipment expenditures all declined in the fourth quarter relative to the same period a year earlier.”...MORE
