"Agricultural credit conditions became more favorable overall compared with a year ago, although relatively minor additional collateral requirements were reported," he says. "District agricultural land values were 19% higher in the first quarter of 2012 compared with the first quarter of 2011 -- a shade down from the year-over-year increases of the past three quarters."
Just as elsewhere in farm country, sustained higher grain prices have had a lot to do with the bullishness in the land sector and farmers' general financial standing. Recent sluggishness in both the crop and livestock sectors is starting to feed speculation among ag lenders that the next few months could see a slide.
"Upward pressures eased early in 2012. The USDA forecasted an easing of tight corn stocks because of an anticipated record fall harvest, leading to a lower estimated price interval of $4.20 to $5.00 per bushel for corn in the 2012–13 crop year," Oppendahl says. "Moreover, the prices for milk and hogs—the District’s biggest income generators from livestock—were down in 2012 relative to their values in the final quarter of 2011. Based on the USDA index of prices paid by farmers, input costs for agriculture rose 6.6% through the first quarter of 2012 compared with the first quarter of 2011. Thus, with possibly lower revenues for several outputs and higher costs for inputs, agriculture faces a more challenging road to profits in 2012 than in 2011."
Land values are still trending higher and there is still less demand for non-real-estate loans for farmers in the Chicago Fed district comprising Iowa, much of Wisconsin, Michigan, northern Illinois and northern Indiana, says Fed business economist David Oppendahl.
