Drought has mild impact on Iowa farmland values
Friday, August 17, 2012 11:26 AM
Drought 2012 has done little to diminish the value of Iowa farmland, according to a survey of agriculture bankers by the Federal Reserve Bank of Chicago.
In the six-state area covered by the survey, the price of prime farmland increased 1 percent in the second quarter, a slower rise than in previous quarters. However, prices have gone up 15 percent over the year-ago period, according to the survey.
The value of Iowa farmland increased 2 percent in the quarter and 24 percent over the year.
"With 22 percent of the respondents anticipating higher farmland values for the third quarter of 2012 and only 4 percent anticipating lower ones, the drought did not seem to have stifled all the momentum of rising agricultural land values," according to the Chicago Fed's Ag Letter.
A drought-induced spike in prices for corn and soybeans combined with crop insurance will partially offset the drought's impact on farm income, the Chicago Fed said. All but 22 percent of corn acres were covered by crop insurance.
Other report conclusions are:
- Farm credit remained strong. Sixty-five percent of bankers said their institutions had more money available for agriculture loans. "Farmers have become depositors, not borrowers," said one banker
- Repayment rates for non-real estate farm loans were above the level of a year ago; 94 percent of agricultural loans have no significant repayment problems; and there were fewer loan renewals and extensions.
- Average loan-to-deposit ratio was 68 percent, and demand for non-real estate loans was feeble, the Chicago Fed said.
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