Farmland Values Continue to Climb

Tuesday, February 15th, 2022 -- 9:01 AM

(Wisconsin Ag Connection) Farmland values continued to climb to new heights within the Seventh Federal Reserve District during the past year, with every state in the Upper Midwest seeing double-digit increases in agricultural property.

According to the Wisconsin Ag Connection, that's according to the latest survey of agricultural lenders in the district, which stated ag property values were a whopping 22 percent higher during the fourth quarter of 2021 compared to the same period a year earlier, the largest such gain in more than a decade, and rose seven percent between the months of October through December from the previous quarter.

In the most recent questionnaire of 147 rural bankers, survey respondents noted that Wisconsin properties were up 12 percent from last year, and climbed four percent during the fourth quarter.

Farmland in Iowa, Illinois, Indiana and Michigan also saw a growth in value, with Indiana showing the most strength compared to late-2020 at 22 percent. "More than making up for their real declines from 2014 through 2019, District farmland values reached a new peak in 2021," said Reserve Economist David Oppedahl.

"At the end of 2021, District farmland values were up nearly seven percent from their prior peak in 2013 in real terms; they were up even more at about 22 percent in nominal terms after almost fully recovering to their previous peak in 2013 by the end of 2020."

Oppedahl attributes the large gains to lower interest rates, government payouts from the COVID-19 pandemic, and higher farmgate prices for corn and soybeans.

"Revenues for these crops were up not only because of production growth in the five states, but also because of higher crop prices," he noted. "All District states had higher yields for both corn and soybeans in 2021 than in 2020, even with drought across a substantial portion of the District."

Meanwhile, agricultural credit conditions during the fourth quarter of 2021 continued to show signs of improvement. The survey indicated that non-real-estate farm loan demand relative to a year earlier was lower for a sixth consecutive quarter; and for ten quarters in a row, there have been more funds available for lending than in the same quarter the prior year at survey respondents' banks.

Looking ahead, most of the bankers anticipate that real estate loan volumes will be event larger in the first three months of 2022 compared with the same time a year ago, while non-real-estate loan volumes will be smaller.

For the fifth quarter in a row, a majority of responding bankers felt farmland values would go up in the next quarter.

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