Farmland Value Slump Continues

The Federal Reserve Bank of Kansas City’s Agricultural Survey shows a moderate decline in cash rents and farmland values in the fourth quarter of 2016. Tenth-District Bankers in seven states note that weakness in farm income is having a negative impact on farmland value. 

Nonirrigated and irrigated farmland value dropped six percent on average and ranchland values were seven percent lower over the same period. Cash rents for both irrigated and nonirrigated cropland dropped eight percent last year while ranchland cash rents were 12 percent lower in the fourth quarter of last year. Credit conditions also weakened because of lower farm income and bankers have responded by adopting some risk prevention measures. 

Some measures include increasing interest rates for all variable and fixed-rate farm loans. Over 30 percent of bankers reported increasing collateral requirements, which is the largest share in survey history. Although a credit shortage appears unlikely for now, marginal operations will find it harder to obtain credit at the same pace as when the farm economy was stronger.

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