Are Land Value Increases Flattening Out?

The Federal Reserve Bank of Chicago produces a quarterly newsletter on farmland values for their district which comprises, Illinois, Iowa, Indiana, Michigan and Wisconsin.  Their latest report seems to indicate a flattening of the rapid farmland price increases we have seen over the last few years.  although prices were up 17% on an annual basis, the net change for the second quarter versus the first quarter was zero.

There does seem to be some seasonality to the second quarter since a couple of previous years have reported no change for the second quarter most likely due to farmers planting their crops and some uncertainty as to the prices they will receive.

Indiana saw the highest increases at 21% and 5% for the year and quarter, respectively.  Michigan showed an 7% decrease for the quarter, but it appears to be more volatile than other states.

A majority of the bankers surveyed expect farmland prices to be flat for the remainder of the year.  We shall see if this trend continues, but with large uncertainty to this years crop and the possible expectations for increases in long-term interest rates, it would not surprise us to see at least a flattening or even a drop in prices over the next few quarters.

We will keep you posted.

Paul Neiffer