Fed District farmland values up slightly

CHICAGO — In the first quarter of 2025, the Seventh Federal Reserve District’s agricultural land values saw a 1% increase from a year ago, and “good” farmland values rose 4% from the fourth quarter of 2024 on average across five states.

The findings are based on survey respondents from 141 agricultural banks in the district that includes the northern two-thirds of Illinois and Indiana, all of Iowa, the southern two-thirds of Wisconsin, and Michigan’s Lower Peninsula.

Farmland value in Illinois’ portion of the district rose 5% in the first quarter of 2025 and was unchanged year-over-year.

Indiana’s farmland value in the district increased 1% in the first quarter of this year and was down 6% from a year ago.

The survey found Iowa’s farmland value increased 4% since Jan. 1 and was unchanged compared to April 1, 2024.

The largest year-over-year increase was 11% in Wisconsin, while values increased 4% in the first quarter of 2025.

The report defines “good” farmland as highly productive.

The report, authored by David Oppedahl, policy adviser, and Elizabeth Kepner, senior research analyst, with the Federal Reserve Bank of Chicago, was published in the May AgLetter.

Land Demand

Demand to purchase farmland was lower in the three- to six-month period ending with March 2025 than in the same period ending with March 2024; 15% of the survey respondents reported higher demand to purchase farmland and 29% reported lower demand.

“Plus, the amount of farmland for sale was down during the winter and early spring of 2025 compared with a year earlier. Likewise, the number of farms and the amount of acreage sold were down in the winter and early spring of 2025 relative to a year ago,” Oppedahl said.

Cash Rent

Annual cash rental rates for Seventh District farmland saw a decrease of 2% in 2025 — the first decline since 2020.

For 2025, average annual cash rents for farmland were down 2% in Illinois and 3% in Iowa and up 1% in Indiana and 3% in Wisconsin; not enough survey responses were received from bankers in Michigan to report a numerical change for that state.

Credit Conditions

District agricultural credit conditions weakened during the first quarter of 2025.

Repayment rates for non-real estate farm loans were much lower in the January-through-March period of 2025 compared with a year ago, and the renewals and extensions of these loans were higher.

In the first quarter of 2025, demand for non-real-estate farm loans relative to a year ago was up for the sixth consecutive quarter, while the availability of funds for agricultural lending relative to a year earlier was down for the eighth consecutive quarter.

Looking Forward

According to an Illinois banker, “working capital decreased dramatically in 2024 and probably will in 2025, as well.”

With farms in need of more financial liquidity, survey respondents forecasted that the overall volume of non-real-estate farm loans would rise in the district during the April through June period of 2025 relative to the same period of 2024; 36% of the responding bankers expected a higher volume of such loans, while 16% expected a lower volume.

In particular, operating, feeder cattle and Farm Service Agency-guaranteed loans were anticipated to have higher volumes relative to a year earlier.

In contrast, survey respondents forecasted a decline in the Seventh District’s farm real estate loan volume in the second quarter of 2025 from a year earlier.

In the first quarter of 2025, 48% of survey respondents considered farmland to be overvalued, while only 1% considered it undervalued.

Even so, over two-thirds of the responding bankers expected farmland values to be unchanged in the second quarter of 2025.

Specifically, 69% of these bankers forecasted agricultural land values to be stable, 25% forecasted them to decrease and just 6% forecasted them to increase.