WASHINGTON, Feb. 16 – Midwest farmland values increased four percent during the final three months of 2011, capping off a year in which the value of “good” agricultural land rose by 22 percent – the largest annual jump since 1976, the Federal Reserve Bank of Chicago reported Thursday.
More than four out of ten commercial banks surveyed in the Seventh Federal Reserve District expect the upward momentum to continue through March.
The 7th District includes all of Iowa and most of Illinois, Indiana, Michigan and Wisconsin.
“The year 2011 may go down in the annals of U.S. agriculture as a once-in-a-generation phenomenon,” Chicago Fed economist David Oppedahl wrote in the regional bank’s February AgLetter.
Supporting the dramatic gain in land values was an “unusual” shift up in agricultural prices across the board, Oppedahl said.
Corn, soybean, and wheat prices averaged 57 percent, 26 percent, and 45 percent, respectively, higher in 2011 than in 2010 while milk, hog, and beef cattle prices rose 23 percent, 21 percent, and 21 percent, respectively, according to USDA data.
This may help to explain why survey respondents predicted more spending by Corn Belt farmers spending by farmers this year on land, machinery and equipment, and motor vehicles.
“The optimism implicit in these predictions suggested that agriculture could experience another phenomenal year,” Oppedahl concluded.
Agricultural credit conditions were stronger from October through December than in the same period the year before, the survey found, although non-real estate loan demand was weaker.
Interest rates on ag loans moved even lower and at the beginning of 2012 averaged 5.47 percent for operating loans and 5.2 percent for real estate.
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