Farmland Values And Credit Conditions

There was an annual increase of 12 percent in the Seventh Federal Reserve District’s agricultural land values in 2022— which helped them reach a new peak, even though the yearly gain was smaller than that of 2021. Values for “good” farmland in the District were unchanged in the fourth quarter of 2022 from the third quarter, according to 147 agricultural bankers who responded to the January survey. Sixteen percent of the survey respondents expected farmland values to rise during the January through March period of 2023, 10 percent expected them to fall, and 74 percent expected them to be stable. District agricultural credit conditions during the fourth quarter of 2022 remained healthy. In the final quarter of 2022, repayment rates for non-real-estate farm loans were again higher than a year ago, plus loan renewals and extensions were lower than a year ago once more. Less than 1 percent of agricultural borrowers were not likely to qualify for operating credit at the survey respondents’ banks in 2023 after qualifying in the previous year. That said, non-real-estate farm loan demand relative to a year ago was lower for the tenth consecutive quarter. There were again more funds available for lending than in the same quarter of the prior year at survey respondents’ banks in the final quarter of 2022, after the streak of 12 quarters with more funds available had been interrupted in the third quarter of 2022. The average loan-to-deposit ratio for the District rose to 70.6 percent in the fourth quarter of 2022—its highest reading since the fourth quarter of 2020. At the end of 2022, the District’s average nominal interest rates on farm operating, feeder cattle, and farm real estate loans were at their highest levels in 15 years, whereas average real rates for all three were last higher at the end of the first quarter of 2021.