Agricultural real estate values in the Federal Reserve’s 10th district remained resilient through the end of 2023. However, capital spending slowed alongside higher rates and lower farm income.
The 10th Federal Reserve district encompasses Wyoming, Colorado, northern New Mexico, Oklahoma, Kansas, Nebraska and western Missouri.
A report by Federal Reserve Economists Cortney Cowley, Jannety Mosley and Ty Kreitman added in a report, “The value of non-irrigated farmland in the region grew around 10% from a year ago despite sharply higher interest rates and a moderation in farm income and credit conditions.”
Demand for farm loans picked up for a growing share of lenders at the end of 2023, as lower crop prices and relatively stable production expenses squeezed margins for some farm borrowers, the economists said.
FARM ECONOMY MODERATES
The farm economy continued to moderate alongside lower crop prices, but elevated cattle prices and strong farmland values provided some stability, they said. At the end of 2023 and beginning of 2024, production forecasts for the current crop year weighed on crop prices. Prices for corn, soybeans and wheat declined steadily throughout the fourth quarter, contributing to lower farm incomes compared with a year ago.
Cattle prices have stabilized at high levels alongside historically low inventories, and despite recent concerns related to crop markets, demand for good quality cropland remains robust, supporting real estate values, the Federal Reserve report said.
LAND MARKETS AND INTEREST RATES
Despite lower commodity prices and higher interest rates, growth in farmland values remained firm through the end of 2023, the economists said. Non-irrigated farmland values across the district increased at a steady pace, while the pace of growth in irrigated farmland and ranchland values slowed slightly.
Alongside a drop in crop prices, there was some financial strain from increased expenses and lower revenues, but values for all types of farmland still grew by about 8%, on average, from the previous year, they said.
Farmland values remained resilient but varied throughout the district, the Bank said. Increases in non-irrigated land values were particularly high in western Missouri and Nebraska.
In Nebraska, land values remained high alongside strong demand for cropland, the report said. Irrigated cropland and ranchland values increased at a slower rate in Oklahoma, as there were slight shifts in demand to land for recreation and other investment opportunities amid higher interest rates and lingering drought in some areas.
Cash rents steadied despite further growth in farmland values, the Bank said. Average cash rents on ranchland inched downward from a year ago during the second half of 2023 while non-irrigated and irrigated rents were largely unchanged.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $181.28 per cwt to $182.78, compared with last week’s range of $175.15 to $182.00 per cwt. FOB dressed steers, and heifers went for $281.36 per cwt to $286.67, compared with $275.52 to $286.37.
The USDA choice cutout Tuesday was down $1.81 per cwt at $292.27 while select was off $1.72 at $285.30. The choice/select spread narrowed to $6.97 from $7.06 with 89 loads of fabricated product and 19 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.35 to $1.45 a bushel over the Mar corn contract, which settled at $4.30 3/4 a bushel, up $0.00 1/4.
No delivery intentions were posted Tuesday for the Feb live cattle contract.
The CME Feeder Cattle Index for the seven days ended Monday was $246.87 per cwt, up $0.81. This compares with Tuesday’s Mar contract settlement of $248.00, down $0.82.