Prices for prime crop land in the central Corn Belt held up better than other regions in the first quarter, but the outlook for low grain prices looked likely to pressure land values and farm incomes further in coming months, according to Federal Reserve quarterly surveys of farm bankers issued on Thursday.
The Federal Reserve Bank of Chicago reported an average rise of 1 percent in the value of prime farmland in the first quarter of 2015 compared to the prior three months, with values holding steady from a year ago. But it said a jump in farmland values in the dairy state of Wisconsin masked declines in values in the big crop states of Illinois, Indiana and especially Iowa.
"Just over half of the responding bankers expected farmland values to be stable during the second quarter of 2015, but nearly all of the rest expected farmland values to head lower," the Chicago Fed said in its survey of 234 bankers.
Prices for farmland, the main collateral for farm loans, are closely watched by the Fed and agribusinesses as a key indicator of the farm economy's health.
Earlier on Thursday, the Fed banks in Kansas City and St. Louis reported year-on-year declines for prime farmland in their districts for the first quarter.
"Low crop prices placed added stress on net farm incomes and contributed to weaker credit conditions in the first quarter," the Kansas City Fed said of central Plains states.
Irrigated crop land values in the Kansas City district, a top wheat, corn and cattle region, dropped 2.1 percent from the same period last year, "falling slightly below year-ago levels for the first time in more than five years," the bank said.
"Looking ahead, very few bankers expect price appreciation" for crop land, it said. "Bankers expect continued strength in the cattle sector and increasing cattle inventories will sustain demand, and prices, for ranchland."
In the northern Delta and southern Midwest region overseen by the Federal Reserve Bank of St. Louis, both crop and ranchland values fell in the first quarter from a year ago.
One key leading indicator was a retreat in cash rents.
"Strikingly, cash rental rates for District agricultural land were down 8 percent for 2015 compared with 2014. This decline provided some relief in rental costs for farmers facing much lower crop prices than in recent years," the Chicago Fed said.