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Farmland values in the U.S. Midwest surged 19 percent in the first quarter from a year earlier as a rally in commodity prices boosted farm earnings and demand for acreage, the Federal Reserve Bank of Chicago said.
Rising net income from corn, soybeans and hay supported higher land prices from a year earlier in Iowa, Illinois, Indiana, Michigan and Wisconsin, the Fed said today in a report. Land values rose 5 percent from the fourth quarter, and about one-third of the 231 bankers surveyed by the Fed forecast higher values in the second quarter.
“Bidding among farmers was common at farmland auctions, driving up” prices, David Oppedahl, a business economist at the bank, said in the quarterly report. “Relative to investors, farmers again purchased a higher share of the acres sold in the past three to six months.”
Farmland values in Iowa, the biggest U.S. producer of corn and soybeans, were up 27 percent on April 1 from a year earlier and 4 percent higher compared with Jan. 1, Fed data show. Illinois jumped 20 percent in the past year, Indiana advanced 15 percent, Wisconsin increased 13 percent, and Michigan rose 7 percent.
The cost to rent farmland in the district rose 17 percent from a year earlier, the second-largest increase since the survey began in 1960, according to the quarterly report.
Falling interest rates for operating and real-estate loans improved credit conditions for agricultural producers in the first quarter, the Chicago Fed said. The index of rate of repayments on non-real-estate agricultural loans climbed to the highest ever and 56 percent of survey respondents reported improvement. Loan renewals and extensions declined, with 37 percent of bankers reporting fewer than a year earlier.
Loans to buy farm machinery and build grain storage were expected to rise in the current quarter from a year earlier, the Fed said.
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