Corn Belt and Cash Rents Cropland Values Level Off
The Chicago Federal Reserve releases a quarterly update on cropland values and cash rents for their district which comprises the three main “I” states in the corn belt (Iowa, Illinois and Indiana) and although good Iowa farm land was up 1% for the quarter, good farmland in Illinois and Indiana dropped 4% in the latest report.
Another sign of possible slipping land values is that cash rents were down 2% for the quarter. The value of farmland is directly tied to cash rents and there is a very good chart in the report showing the index for both cash rents and values beginning in 1981 with an index value of 100 for each.
Farmland values bottomed out in 1987 with a reading slight lower than 50, while cash rents bottomed out right at 50. Over the next 10 years very little change occurred in either cash rents or land values. Beginning in about 2000, farmland values begin to accelerate while cash rents remain fairly steady until about 2007 when they begin their rapid accelerated growth.
Farmland values topped out last year at about 150 (on an index basis), whereas cash rents only got up to about 110. The 40 point difference between land values and cash rents is most likely related to our period of extremely low-interest rates beginning with the financial crisis of 2008.
These reports always have some good nuggets of information and would highly suggest farmers bookmarking their websites.
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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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