Land price outlook for corn, soy states better than for wheat country


Farmland values in major US corn and soybean growing areas may be poised for stability, even as values in the wheat belt face further decline, after fall in some states at the fastest in 15 years, according to the Federal Reserve.

Farmland prices in major US agricultural continued to fall in the last three months of 2016, depressed by the dent from weak crop prices to farm finances, whose deterioration was also evident in weakened credit conditions, data from the US central bank showed.

Values declined in the Midwest - best known for corn and soybean production - after in many states, such as Indiana, showing some resilience in the July-to-September period.

In the central Plains, the main hard red winter wheat-growing area, values extended to 6% their drop, as measured by prices of non-irrigated last, "the largest [fall] since the Great Recession of 2007-09", the Fed said, terming the retreat a "slump".

In Kansas, the top wheat-growing state, values tumbled by 13%, while for ranchland, price decreases in Kansas, Nebraska and Missouri "were the largest since 2002".

Wheat vs row crop country

However, lenders surveyed by the central bank proved divided in prospects for land prices this year.

In winter wheat country, as well as in the southern Midwest, most bankers forecast further depreciation this year – potentially at a considerable pace.

In the central Plains, "a majority of bankers expected a decline of 6-10% in non-irrigated farmland values by year-end 2017", the Fed said, flagging a continued decline in incomes for the region's producers.

By contrast, in the Midwest, at nearly 60%, the proportion of lenders surveyed by the bank expecting further price falls – at least during the first three months of this year - exceeded the 40% forecasting a further market decline.

'Longest in history'

While the Fed did not elucidate on the reasons behind the divergence in outlooks, it tallies with a differing narrative of farm incomes between growers in wheat country, and in the corn and soybean belt.

In the central Plains, "farm income fell for the 15th consecutive quarter, the longest such streak in survey history," the Fed said, noting expectations of a further decline during the first three months of 2017.

However, in the northern Midwest, the bank flagged the impact of last year's record corn and soybean harvests in "softening the slide in farmland values".

Indeed, "even though plentiful supplies of corn and soybeans exerted downward pressures on corn and soybean prices in 2016, reinvigorated demand for these crops - particularly for export - helped allay fears of even lower crop prices.

"Without a major hit to the returns of most farms in the district, the downturn in agricultural land values didn't gain momentum in 2016."

'Tough year ahead'

The Fed's Chicago bank, which covers the northern Midwest, highlighted comment from one lender surveyed that "last year 'ended much better than expected', assisted by strong crop yields and some increases in product prices from a year ago".

By contrast, the Kansas City Fed, covering the central Plains, noted one banker from south west Kansas who said that "we have been shoring up our lines with additional collateral where required payments have fallen short.

"We are expecting a tough year ahead."


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