WASHINGTON, Sept. 2- Farmland values in the Midwest are 17 percent higher from last year for the second quarter of 2011, according to the Federal Reserve Bank of Chicago. The Seventh Federal Reserve District, which includes Iowa, parts of Illinois, Indiana, Wisconsin and Michigan, also has stronger agricultural credit conditions in the second quarter of 2011 relative to last year.
According to a survey of 226 agricultural bankers in the District, over 60 percent forecasted farmland values to stabilize in the third quarter of 2011 and about one-third still expected farmland values to move higher.
Joe Bubon, executive vice president of Murray Wise Associates, conducted an auction where an Illinois farmer paid $4.9 million for 565 acres of land adjacent to Minonk, Ill., just north of Bloomington.

“We continue to see auctions in which local farmers and investors -- who are in the best position to understand the value of the land -- are the high bidders," said Bubon.

The Federal Reserve Bank of Chicago reported that the value of “good” agricultural land increased four percent in the second quarter compared with the first quarter of 2011. Murray Wise, CEO of Murray Wise Associates, believes farmland values will continue to climb due to high returns they can achieve as a result of strong demand for corn, soybeans and other products.

“I believe we are in the early stages of a major shift in worldwide food consumption habits, especially in China and other Asian nations. As long as that trend remains intact, farmland will be a rock solid investment at today's prices -- and tomorrow's," said Murray Wise, CEO of Murray Wise Associates.

 Some bankers are concerned about the risks facing farmland markets, especially with regard to declines in crop prices, according to AgLetter.  

“However, these views formed a minority, as just 2 percent of responding bankers expected farmland values to fall in the third quarter of 2011. Thirty-six percent of survey respondents anticipated higher farmland values in the third quarter, and 62 percent expected no change.”

The August edition of AgLetter reported that higher crop prices supported further gains in farmland values. In 2011, corn and soybean prices have stayed well above the levels of a year ago. Relative to a year earlier, July corn prices were 85 percent higher and July soybean prices were 37 percent higher. The USDA estimated that the nation’s 2011 harvest of corn for grain will be 3.8 percent larger than the 2010 harvest.

Although livestock prices experienced higher revenues with 2011 prices above those of 2010, higher feed costs have limited rise in income for the sector. AgLetter also reports prices for hogs, cattle, and milk were 23 percent, 20 percent, and 39 percent higher this July than last July, respectively.


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