Farmland Values Up, Farm Income Down in Eighth District

Despite being expected to decline during the third quarter, quality farmland values rose 11.8 percent from the second quarter, according to the Federal Reserve Bank of St. Louis’ most recent Agricultural Finance Monitor. The publication covers agricultural conditions in the Eighth District, which comprises all or part of seven states.¹ Results are based on survey responses from 41 agricultural banks within the boundaries of the Eighth District.

Farmland Values and Cash Rents

Quality farmland in the Eighth District averaged $6,120 per acre in the third quarter, up from $5,473 per acre in the second quarter and up 14.8 percent from the third quarter of 2013. Ranchland and pastureland values averaged $2,570 per acre in the third quarter, up 11.1 percent from the previous quarter and up 8.1 percent from the same quarter one year ago.

Cash rents for quality farmland across the Eighth District averaged $194 per acre in the third quarter, up 1.6 percent from the second quarter. Cash rents for ranchland or pastureland rose 6.8 percent in the third quarter to $63 per acre.

Farm Income and Expenditures

Third-quarter farm income declined from the same period one year ago, with the third-quarter index value of 76, the lowest since the Agricultural Finance Monitor began being published in 2012.² Fourth-quarter farm income is expected to be lower, with an index value of 41. However, it should be noted that farm income is highly volatile and subject to seasonal patterns that occur in the agricultural sector.

Farm household spending and capital equipment expenditures also declined in the third quarter relative to the same period one year earlier. Both categories are expected to decline further in the fourth quarter.

Lending Conditions

A slightly larger proportion of bankers (index value of 103) reported an increase in loan demand relative to the same period one year ago. The proportion of bankers expecting loan demand to increase over the next three months relative to a year ago increased slightly (index value of 106). By contrast, a larger number of bankers expect that the availability of funds and loan repayment rates will fall in the fourth quarter relative to a year ago.

Notes and References

¹ The Eighth District’s states are Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

² Index results above or below 100 indicate proportionately higher or lower lender values.

Additional Resources

• Agricultural Finance Monitor
• On the Economy: Beige Book: Most Fed Districts See Continued Economic Growth
• On the Economy: A Look at the 100 Years of Service of the Federal Reserve Bank of St. Louis