February 28, 2020

Farmland Values- Federal Reserve Bank of Kansas City

Following Thursday’s reports on farmland values from both the Federal Reserve Banks of Chicago and St. Louis, on Friday, the Federal Reserve Bank of Kansas City indicated on Friday that, “Farmland values in the Tenth District generally held steady in the fourth quarter of 2014 despite further declines in farm income. Most bankers surveyed, however, said they expect cropland values to fall in 2015 alongside reduced expectations for farm income. Amid shrinking profit margins, demand for operating loans to pay for crop inputs is expected to remain elevated, and some bankers expressed concern that loan repayment rates might deteriorate if weak profit margins persist.”

Chart- Tenth District Farmland Values, Annual Gains

The report noted that, “Cash rental rates also had moderated only slightly from a year ago despite prospects of lower crop revenue in 2015. While tenants were concerned about weaker profit margins due to low crop prices and high input costs, landlords cited high property taxes during rent negotiations as justification for keeping rents steady.”

Chart- Tenth District Farmland Cash Rental Rates, Annual Gains

The Kansas City Fed added that, “Although overall farm income continued to soften, livestock producers have experienced record profits. Profit margins remained particularly strong for cow/calf operators due to low feed costs and persistently high feeder cattle prices, which have been supported by reduced U.S. cattle inventories. U.S. cattle inventories have yet to return to pre-drought levels, and the USDA National Drought Mitigation Center recently reported that about 26 percent of the current cattle inventory is in regions hampered by drought. In the Tenth District, large portions of the major cattle producing areas in Oklahoma and Kansas are still affected by moderate to exceptional drought.”

Reuters writer Christine Stebbins reported on Friday that, “But the [Kansas City Fed] bank noted sharp variations based on farm income trends. Nebraska, the region’s top corn producer, saw non-irrigated land values drop 3.4 percent from a year ago. In Oklahoma, with more grazing land, those values jumped 19 percent.”


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