Farmland values in the Federal Reserve’s Tenth District continued to increase at a rapid pace through 2021, Kansas City Federal Reserve Bank Economists Nate Kauffman and Ty Kreitman said last week in a report.
Alongside sustained strength in farm income and credit conditions, the value of all types of farmland was more than 20% higher than a year ago, the economists said. The strength in agricultural real estate markets was supported by strong demand, historically low interest rates and vastly improved conditions in the farm economy.
FAVORABLE OUTLOOK
Lenders reported a mostly favorable outlook for agriculture in the District but cited the rise in input costs as a risk, the report said. Even with uncertainty around input costs, lenders expected favorable conditions in the economy to support farm finances and lead to further gains in farmland values in 2022.
The possibility of weaker agricultural income and higher interest rates remain as risks for farmland markets, the economists said. Despite the risks, the agricultural sector appears to be well positioned for the year ahead, supported by strong balance sheets, high agricultural commodity prices and sharp gains in farmland values.
FARMLAND VALUES AND INTEREST RATES
Farm real estate values increased in the first quarter at a pace similar to recent quarters, they said. The value of all types of agricultural real estate in the District was about 20% higher than a year ago, which was similar to the previous quarter and followed several periods of mounting increases.
Following a sharp rise in the value of non-irrigated farmland at the end of 2021, values increased about 5% from the previous quarter, which was a rate similar to the average over the past year, the report said.
Strength in farm real estate values was consistent across all states in the District, the Bank report said. The value of all land types increased by at least 15% from a year ago in all states.
The increase in non-irrigated and irrigated cropland values was most notable in the Mountain States and Kansas, while the rise in ranchland values was highest in Nebraska, the economists said.
After a year of rapid growth in farm real estate values, gains in cash rents also accelerated, they said. Cash rents for all types of land in the District were about 15% higher than a year ago, the fastest increase since 2013.
As landowners likely began to adjust rental rates along with growth in land values, leasing costs increased from the previous quarter at a notably quicker pace than previous periods, the report said.
The average rate for farm real estate loans increased during the late-March survey period, tracking the increase in the federal funds rate.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $143.30 to $143.60 per cwt, compared with last week’s range of $140.00 to $158.23. FOB dressed steers, and heifers went for $222.11 to $222.52 per cwt, versus $220.11 to $225.73.
The USDA choice cutout Monday was up $1.36 per cwt at $260.31, while select was up $1.77 at $245.67. The choice/select spread narrowed to $14.64 from $15.05 with 60 loads of fabricated product and 35 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.55 to $1.65 a bushel over the Jul futures and for southwest Kansas were steady at even the Jul, which settled at $8.09 1/2 a bushel, up $0.28 1/4.
The CME Feeder Cattle Index for the seven days ended Friday was $156.00 per cwt down $0.36. This compares with Monday’s May contract settlement of $157.40, down $0.47.