Friday, June 17, 2016

U.S. Farmland Price Slump Slows

From Agrimoney:

US land price slump slows - helped by return to growth in Iowa values
US farmland prices are falling again this month, and are now down 9.5% year on year – but the rate of decline is slowing, amid the recovery in commodity prices.
An index of farmland prices in major US agricultural states, from Minnesota to Colorado, compiled by Creighton University came in at 32.3 points for June – remaining for a 31st successive month below the 50-point level which indicates a neutral market.
"Over the past 12 months, farm prices are down by 9.5%," said Ernie Goss, the Creighton University economics professor in charge of the survey.
Assuming an average price of $3,020 per acre, as calculated by the US Department of Agriculture for last year, the decline is equivalent to nearly $290 per acre - or some $290bn in terms of the value lost from the total US farmland portfolio.
Iowa prices return to growth
However, the rate of price decline shown by the Creighton index was slower than the 28.4 seen last month.
Indeed, June's figure was the strongest reading in seven months, and well above the recent low of 20.2 recorded in March.
The price index for Iowa, whose market is closely-watched, being the top corn and soybean growing state, rose by 4.2 points from the May reading of 47.3 – meaning it moved above 50 and back into territory indicating price appreciation.
According to central bank data, Iowa prices fell in 2015 for a third calendar year, and extended their losses in the January-to-March period of 2016, easing by 1% quarter on quarter....

Here's Creighton's Rural Mainsteet Economic Outliik for June:

Rural Mainstreet Economy Remains Weak for June: Bankers Tighten Farm Loans
June Survey Results at a Glance:
* For a tenth straight month, the Rural Mainstreet Index remained below growth neutral.
* Farmland prices remained below growth neutral for the 31st straight month.
* Due to the weak agriculture economy, 73.5 percent of bankers increased collateral requirements, half boosted interest rates, and 35.3 percent rejected a higher percentage of farm loans.
* Rural Mainstreet businesses boosted hiring for the month.

For Immediate Release:  June 16, 2016
OMAHA, Neb. – The Creighton University Rural Mainstreet Index for June increased from May’s very weak reading, though it remained below growth neutral, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.  

Overall: The index, which ranges between 0 and 100, rose to 43.9 from May’s 40.9. While remaining very fragile, the Rural Mainstreet Index (RMI) has increased four of the last five months.

“This is the 10th straight month the overall index has remained below growth neutral. Even though agriculture and energy commodity prices have increased recently, they remain well below last year’s prices and from their peak levels in 2011. Over the past 12 months, farm prices are down by 9.5 percent, grain prices are off by 4 percent, and livestock are down by 15 percent,”  said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Due to reductions in farm income and agriculture commodity prices over the past three years, bankers have altered their farm lending practices. Almost three of four, or 73.5 percent increased collateral requirements, half boosted interest rates, more than one-third, or 35.3 percent rejected a higher percentage of farm loans. Approximately, 17.6 percent of the bankers reported that their banks reduced the average size of farm loans....