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. "The outlook for most crop producers looks challenging for the next five years with most forecasters projecting corn and soybean prices to be at or near break-even levels. Producers may benefit from USDA commodity title programs that could be triggered by lower commodity prices. These programs, combined with disciplined risk management practices and the generally strong financial condition of borrowers comprising the district's crop portfolio, are expected to mitigate the initial impact."

About AgriBank

Under the Farm Credit System's cooperative structure, AgriBank is primarily owned by 17 affiliated Farm Credit Associations, with more than $95 billion in total assets. The AgriBank District covers America's Midwest, a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas. About half of the nation's cropland is located within the AgriBank District, providing the Bank and its Association owners with expertise in production agriculture. For more information, visit www.AgriBank.com.