Farmland values in the Great Plains increased over the past year, overcoming double digit declines in corn, soybean, and wheat prices. Quarterly farmland values decreased slightly as stubbornly low grain prices brought into question the profitability of farmland in 2015. Credit conditions struggled as the gap between new loan demand and loan repayment rates widened.
Farmland Values
The Tenth Federal District, which is made up of portions of Colorado, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, and Wyoming, reported a 0.9% increase in nonirrigated farmland values from the previous year. The increase was unexpected after the large decline in corn, soybean, and wheat prices over the period. Oklahoma reported the largest increase at 6.8%, while Nebraska was the only state to report a decrease at 0.6%. Irrigated farmland values decreased over the past year, falling 2.1%. Decreases in Kansas and Nebraska more than offset increases reported in Colorado, New Mexico, Oklahoma, and Wyoming.
The quarterly farmland values report was less positive, showing a slight decline from the fourth quarter of 2014. Non-irrigated cropland decreased less than 1%, while irrigated farmland decreased slightly more than 1% over the period. Demand for highly productive properties remained elevated in the district during the first quarter of 2015, though respondents reported a decline in farmland available in comparison to this time last year.
Tenth District Farmland Value Gains by State, First Quarter 2015
Credit
The credit condition of the district worsened for the third consecutive quarter as new loan demand increased and repayment rates decreased. The widening gap between new loan demand and repayment rates continues to worry district bankers. Over the past six months this report has suggested that further separation of new loan demand and loan repayment rates could force banks to tighten lending and increase collateral requirements. Despite the continuation of this trend, the district reported an increase in available funds during the first quarter of 2015. Farm income is expected to decline further in 2015 as grain prices remain low.
Outlook
The majority of bankers surveyed expected farmland values to remain stable through the second quarter of 2015, mainly due to the limited amount of farmland available for sale. Respondents believe that the agricultural credit condition will continue to decline. Farmers will continue to search out funding as farm income is expected to remain low in 2015 and loan repayment rates are expected to fall further. Banks are confident they have ample funds to meet the continued increase in loan demand, but as further debt is accumulated the credit quality for the district may become more of a concern.