Long upward ag land values trend ends

CHICAGO — After a four-year run of substantial gains, agricultural land values in the Seventh Federal Reserve District saw a 1% annual decrease.

For the first time in five and six years, Illinois and Indiana, respectively, had annual decreases in their farmland values, both falling 3% year-over-year, while Iowa declined by 2%.

In contrast, Wisconsin had a single-digit annual increase of 8% in agricultural land values for 2024. A Wisconsin banker noted there was “still very little land available for sale.”

Overall, district farmland values increased 1% from the third quarter of 2024 to the fourth quarter.

The findings, authored by David Oppedahl, Seventh District policy adviser, and Elizabeth Kepner, senior research analyst, and published in the district’s AgLetter, are based on respondents from 133 agricultural banks.

The Seventh District of Chicago includes the northern two-thirds of Illinois and Indiana, all of Iowa, the southern two-thirds of Wisconsin and Michigan’s Lower Peninsula.

Adjusted for inflation by the Personal Consumption Expenditures Price Index, district farmland values had an annual decrease of 3.4% in 2024, the first real decrease in five years and the largest real decrease since 2014.

District farmland values edged down from their 2023 peak, but were still 11% above their 2013 peak in real terms and up 43% from their 2013 peak in nominal terms.

“Strong crop yields were a boon for a majority of Seventh District farms in 2024, despite drought in much of the district for at least part of the growing season,” Oppedahl said.

Based on calculations using U.S. Department of Agriculture data, the district states’ corn yields increased 3.7% in 2024 from 2023 and their soybean yields increased 1.1%.

Harvested corn acres were down 3.2% in 2024 from 2023, while harvested soybean acres were up 3.5%.

On net, corn production by Seventh District states increased 0.3%, reaching 6.8 million bushels, the second most ever, after 2016′s record.

In addition, soybean production by district states rose 4.6%, to 1.84 million bushels, the second largest ever, behind 2021′s record.

National corn stocks decreased 1% from 2023, while soybean stocks increased 3%. Although corn stocks declined, the USDA projected prices for the 2024-2025 crop year of $4.25 per bushel for corn, down 6.6% from the previous crop year.

Given the broader availability of soybeans, their prices were projected to be $10.20 per bushel, down 18%.

Using these prices, estimated revenues for the Seventh District states’ 2024 harvest would be down 6.3% for corn and 14% for soybeans from their 2023 levels.

Livestock

“In contrast, prices for livestock products were much higher at the end of 2024 than at the start of the year. In December 2024, the index of prices for livestock and associated products was up 33% from 2023; the prices for cattle, hogs and milk were up 10%, 18%, and 14% from a year earlier, respectively,” Oppedahl said.

“Moreover, given ongoing impacts from avian influenza, egg prices were up 132% from the year prior, though these prices were down 4% from two years ago.

“According to the USDA’s February assessment for 2024, net farm income for the nation was projected to decline by 5.6% (or $8.2 billion) from 2023 despite lower input costs, mostly because of inventory adjustments and lower government payments.

“The dip in farm cash receipts from 2023 was minor given that the drop in cash receipts for crops was almost entirely offset by an increase in cash receipts for animals and their products.”

Nationally, 2024 real net farm income, though down from 2023, remained above its 2020 level. The district’s heavier reliance on corn and soybean revenues created tighter profit margins for lots of farms in the region.

Credit Conditions

District agricultural credit conditions continued to exhibit signs of deterioration during the fourth quarter of 2024.

In the final quarter of 2024, repayment rates for non-real estate farm loans were sharply lower than a year ago, plus loan renewals and extensions were noticeably higher than a year earlier.

The survey found 1.7% of agricultural borrowers were not likely to qualify for operating credit at the survey respondents’ banks in 2025 after qualifying in the previous year.

Non-real-estate farm loan demand relative to a year ago was up for the fifth quarter in a row. For the seventh time in a row, there were fewer funds available for lending than in the same quarter of the prior year at survey respondents’ banks.

The average loan-to-deposit ratio for the Seventh District moved up to 76.7% in the fourth quarter of 2024.

At the end of 2024, the district’s average nominal interest rates on farm operating and feeder cattle loans were somewhat lower than at the end of the third quarter of last year, while its average nominal interest rate on farm real estate loans was unchanged.

Average real interest rates for all three kinds of loans tracked by the survey were at their lowest levels since the third quarter of 2023.

Looking Forward

There were fewer responding bankers, just 4%, who projected agricultural land values to go up in the first quarter of 2025 than those, or 26%, who predicted them to go down.

“With that said, there seemed to be some transactions for farmland in places at much higher prices than for similar ground elsewhere; an Illinois respondent attributed this phenomenon to ‘strong competition among neighbors buying with cash on hand,’” Oppedahl said.

“Thus, there will likely be marked variability in sales prices for specific parcels. But again, on average, district farmland values were expected to be relatively flat or moving slightly downward in the first quarter of 2025, as they had been prior to the pandemic.”