Midwest and Mid-South: Farmland Values Softer, Cash Rents Up


By Sara Schafer, Top Producer, Editor

via AgWeb - May 9, 2019


Farmers continue to face declining farm income in the Midwest and Mid-South regions, according to the latest report from the Federal Reserve Bank of St. Louis. Meanwhile, after holding steady farmland values have edged lower.


Agricultural bankers reported declines in farm income over the first three months of 2019 relative to the same period a year earlier. This marks 21 consecutive quarters with lower farm income. Yet, going forward, some bankers expect farm income to improve in the second quarter.


Since the start of 2017, values for quality farmland in the district have posted year-over-year gains in every quarter expect for three. To start out 2019, quality farmland values fell 0.3% versus year earlier. That followed a 3.4% increase in the fourth quarter of 2018.


Ranchland or pastureland values also decreased in the first quarter by 3.3%. The decline in ranchland or pastureland values in the first quarter was a sharp departure from the 6.5% gain registered in the fourth quarter of 2018 and a more than 12% year-over-year increase in the first quarter of 2018.


Cash rents for quality farmland rose 1.5% in the first quarter, following a 2.9% gain in the fourth quarter of 2018. By contrast, cash rents for ranchland or pastureland fell 8% in the first quarter, after rising 1.3% in the previous quarter.


“Farmers are running out of capital,” a banker from Arkansas noted. “Commodity prices are too low for input costs and rents/land payments.”


Another lender from Arkansas seconded the effect input prices are having on farmers’ profit potential.


“What we are faced with is a commodity market that will not provide enough margin to service the prices that the producers have to pay for inputs such as seed and fertilizer and chemicals,” the lender reported. “I think this is tied to the trade deal but am not sure. In 2005, soybeans were $5.50 per bushel and people grew them. Now they are $8.90 per bushel and you cannot afford to make less than 60 bushels per acre to break even.”


Lenders were asked: What is the most significant risk to the farm sector in 2019? Their responses were:


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