Year over year, "good" farmland values increased 17% across the Seventh Federal Reserve District, although for the second quarter of 2013, values remained unchanged. Four out of the five states within the Seventh District posted double digit annual increases in farmland values with Indiana leading the way with a 21% increase. For the second quarter, values remained nearly unchanged for the first time since 2009.
As many bankers forecasted farmland values to increase in the third quarter (7%) as did to decrease. The majority balance forecasted values to remain constant. Quarterly farmland values remained unchanged for the first time since 2009 due to sliding crop prices. Commodity prices have been in a downward trend via the outlook of a record corn crop and the third largest soybean crop on record. Additionally, the 2013 U.S. corn crop is on pace to be 28% larger than in 2012 and the soybean crop 8% larger than 2012's drought stricken crop.
Crop prices remained relatively high throughout the second quarter. The average corn price was $6.97 per bushel for the quarter, down 1.0% from the first quarter, but up 9.8% from 2012. Soybean prices averaged $14.80 per bushel in this year's second quarter, up 2.1% on the first quarter of 2013 and up 6.5% compared to one year prior.
Farm loan interest rates increased for the first time since early 2011, according to the Seventh District Federal Reserve Bank. The increase occurred after reaching record lows in the first quarter of 2013.
The average loan-to-deposit ratio was 64.6, increasing from the 19-year low experienced in the first quarter of 2013. On average, banks had more money to lend this quarter due to high crop prices and insurance payments from the drought of 2012.
Interest rates for operating loans and agriculture real estate loans increased slightly to 4.94% and 4.65% respectively.
Commodity prices have significantly decreased thus far in the third quarter of 2013 on the outlook of a bumper corn crop and ideal weather conditions. Conversely, prices have started to increase in the past few days due to the dry weather outlook in the Corn Belt. Additionally, the Farm Service Agency (FSA) estimated 3.4 million acres of corn were lost to prevent plant this year and 1.6 million acres of soybeans. Moving forward, the FSA will release estimated prevent plant acreage on a monthly basis throughout harvest.
The Federal Reserve Bank of Chicago's second quarter survey of Farmland Values and Agricultural Credit Conditions Report is a summary of the Seventh District's value of farmland, farm loan portfolio performance, and on-farm income. The Seventh District consists of the entire state of Iowa, and portions of Illinois, Indiana, Wisconsin, and Michigan.