Tags: farm | land | grain

Fed: Farmland Values Soar with Grain Prices

Wednesday, 17 Aug 2011 07:27 PM

(Adds third-quarter outlook in third paragraph.)

Aug. 17 (Bloomberg) -- Farmland values in one of the most- productive regions in the U.S. Midwest soared 17 percent in the second quarter as higher grain prices made real estate more attractive, the Federal Reserve Bank of Chicago said.

Rising demand for wheat, corn and soybeans boosted earnings, supporting higher land prices in the five-state Seventh Federal Reserve District, the Fed said today in a report. The increase in farmland values from a year earlier was the biggest since the 1970s, the Fed said. Gains were reported in Illinois, Iowa, Indiana, Michigan and Wisconsin.

A Fed survey of 226 agricultural bankers in the district showed that 36 percent expect higher farmland prices in the third quarter, and 60 percent forecast stable values.

Higher farm revenue in the second quarter boosted credit conditions, the Fed said. Agricultural loans with “major” or “severe” repayment concerns fell to 2 percent of the total volume, David B. Oppedahl, a business economist at the Fed, said in the report.

Farm machinery and grain storage-construction loans were expected to rise in the current quarter from a year earlier, the Fed said. About 21 percent of bankers said farm real-estate loan volumes in the third quarter will increase from a year earlier, while 13 percent anticipated lower volumes.

Lower interest rates helped boost demand for farmland last quarter, Oppedahl said. The average interest rate on new operating loans was 5.75 percent, more than 300 basis points below the most recent peak of five years ago. Agricultural mortgage rates averaged 5.62 percent, about 220 basis points lower than five years earlier.

Indiana farmland values rose 21 percent in the second quarter from a year earlier. Iowa had a 20 percent jump, and Illinois rose 19 percent

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(Adds third-quarter outlook in third paragraph.)Aug. 17 (Bloomberg) -- Farmland values in one of the most- productive regions in the U.S. Midwest soared 17 percent in the second quarter as higher grain prices made real estate more attractive, the Federal Reserve Bank of...
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2011-27-17
Wednesday, 17 Aug 2011 07:27 PM
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