Farmland Values Are Mixed
The Federal Reserve Bank of Kansas City just released their latest Ag Finance Databook and it appears that certain parts of the Midwest have seen some price increases such as Iowa (up 2%) and Southern Wisconsin (up 5%). However, other parts of the region have seen some steep losses.
The Mountain states are down about 17% and South Dakota is down about 10% from last year. This is probably due to the large concentration of cattle ranches and wheat farms in these states.
Although the farm sector has been stressed, the rate of return for rural farm banks is slightly higher than the five-year average of 1.1% at about 1.2%. Also, farm loans are out performing other loans at smaller banks by about 20 basis points.
Maturities of farm debt (non real estate) has increased from an average maturity of 23 months to about 35 months since 2015. This is a fairly easy way for farmers to inject working capital into their farm operation.
Interest rates exceeding 6% on non-real estate loans has almost doubled to about 15% since 2015.
All-in-all, stress is still apparent, however, the trend appears to be flattening out and we may see a turn around if we get some improvement in prices. We will keep you posted.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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