Lower commodity prices are moderating farmland values through the midsection of the U.S., according to a new report from AgriBank, one of the largest banks within the national Farm Credit System.
The report provides an overview of farmland values across the 15-state AgriBank District, including differences by sector and by state. It also reports the latest data on cash rents and looks ahead to how cropland values may fare in the future.
Highlights
- Farmland values moderating: District average cropland and pastureland values slowed in growth, but did not decline, in 2015, driven by considerably lower commodity prices that result in lower net farm incomes in the grains and oilseeds sector.
- Cash rents down for cropland, up for pastureland: District average cash rents for cropland declined for the first time in over 20 years, while District average cash rents for pastureland increased.
- AgriBank benchmark changes vary widely: District real estate values changed from -10.5% to 10.6% over the 12-month period ending June 30, 2015, according to the AgriBank District 2015 Benchmark Survey.
- Barometer of farmland values holds steady: The district's "implied" cropland capitalization rate holds virtually steady above the 10-year Treasury rate over recent years, indicating the market continues to build in a risk premium that exceeds the expected growth in returns to cropland.
"States heavily concentrated in corn and soybean production experienced declines in cropland values, while values in states with more diversified crops, including wheat and rice, continued to increase, albeit at a more moderate pace," said Jeff Swanhorst, AgriBank executive vice president of credit and chief credit officer.
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