Farmland values in the U.S. Midwest rose 14 percent in the third quarter from a year earlier as crop yields recovered from the 2012 drought, the Federal Reserve Bank of Chicago said.
Iowa, Illinois, Indiana, Michigan and Wisconsin may harvest 38 percent more corn than in 2012, and soybean output may be 8.5 percent higher, the Fed said today in a report, citing U.S. Department of Agriculture forecasts. Land values rose 1 percent from the second quarter.
“Better-than-expected crop yields for the District may have contributed to the momentum of rising farmland values,” David Oppedahl, a senior business economist at the bank, said in the quarterly report, referring to the Fed’s Seventh District of five Midwestern states. “However, in areas affected by back-to-back droughts, the loss of revenue from declines in crop prices and yields may have constrained farmland value gains.”
Seventy-five percent of the 195 bankers surveyed forecast stable farmland prices in the fourth quarter, while 21 percent project lower values. Four percent projected higher prices.
Farmland values in Iowa, the biggest U.S. producer of corn and soybeans, rose 9 percent from a year earlier, the smallest gain among the five states. Iowa’s land values fell 1 percent from the previous quarter, the only decline in the district, as drought conditions tempered gains, according to the report.
Indiana farmland rose 18 percent from a year earlier. That marked the biggest increase in the district.
Incomes for crop farmers are expected to drop this fall and winter from a year earlier, according to 73 percent of survey respondents, while 37 percent project higher earnings for cattle and hog producers, the report said.
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