Farmland values surged in the third quarter according to Federal Reserve Surveys of Agricultural Credit Conditions. The value of nonirrigated cropland increased by 12% or more in all participating Districts. The rapid increase was also consistent across most states, with annual increases of more than 20% in some areas. Supporting farm real estate markets, interest rates on farm loans remained at historic lows and strong farm finances drove further improvement in agricultural credit conditions.

Despite persistent concerns about increases in input costs, agricultural lenders expected farm income and credit conditions to remain strong through the end of the year alongside elevated commodity prices. The accompanying surge in farmland values has bolstered farm balance sheets and provided additional support to the sector. Alongside prospects for further strength in commodity markets, the outlook for farm finances and agricultural land values through the end of 2021 remained strong.

Third Quarter Federal Reserve District Ag Credit Surveys

Farm real estate values rose sharply alongside continued strength in the U.S. agricultural economy. The value of nonirrigated cropland increased by an average of about 15% across all participating Districts (Chart 1). The gains from a year ago were the highest in any quarter since 2013 in all regions and have offset reductions in land values that may have occurred in recent years.

Chart 1: Nonirrigated Cropland Values - is a line chart showing the percent change in nonirrigated cropland values from the previous year the Chicago, Dallas, Kansas City and Minneapolis Districts in every quarter from Q1 2010 to Q3 2021.

The surge in farm real estate values was consistent across nearly all states. The value of nonirrigated cropland increased nearly 10% or more from a year ago in all states with available data except North Dakota (Map). Values grew by over 20% in Iowa, Minnesota and South Dakota and between 9% and 20% in all other states except North Dakota.

Map: Nonirrigated Cropland Values, Third Quarter 2021 - is a map showing the percent change in nonirrigated cropland values from the previous in Q3 2021 for the following individual states from north to south: North Dakota, Minnesota, South Dakota, Southern Wisconsin, Nebraska, Iowa, Northern Illinois, Norther Indiana, Mountain States*, Kansas, Western Missouri, FRB St. Louis District, Oklahoma and Texas.

Providing support to agricultural real estate markets, interest rates on farm loans remained historically low. The average fixed rate charged on loans for farmland declined slightly from last quarter and remained at or near an all-time low in all Districts (Chart 2). On average, interest rates were about 100 basis points below the average from 2015 to 2019 which has reduced financing costs and contributed to higher demand for farmland.

Chart 2: Interest Rates on Farm Real Estate Loans–is a clustered column chart showing the average fixed interest rate on farm real estate loans for the Chicago, Dallas, Kansas City, Minneapolis and St. Louis Districts. Each of the Districts includes columns for 2015-2019 Average, Q1 2021, Q2 2021 and Q3 2021.

Agricultural credit conditions also continued to improve alongside strong farmland markets. Farm loan repayment rates increased from a year ago at a pace similar to the prior quarter in all Districts (Chart 3). Elevated commodity prices and robust government support have boosted farm finances in 2021, leading to improved credit conditions and contributing to the recent strength in farm real estate values.

Chart 3: Farm Loan Repayment Rates - is a line chart showing the diffusion index* of farm loan repayment rates for the Chicago, Dallas, Kansas City, Minneapolis and St. Louis Districts in every quarter from Q1 2010 to Q3 2021.

Data and Information

Excel SpreadsheetFederal Reserve Ag Credit Surveys Historical Data | Excel SpreadsheetFederal Reserve Ag Credit Surveys Tables | txtAbout the Federal Reserve Ag Credit Surveys

The views expressed in this article are those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of Kansas City or the Federal Reserve System. 

Authors

Nathan Kauffman

Vice President, Economist and Omaha Branch Executive

Nathan Kauffman is vice president and Omaha Branch executive with the Federal Reserve Bank of Kansas City. In his role as the Bank’s lead economist and representative in the stat…

Ty Kreitman

Assistant Economist

Ty Kreitman is an assistant economist in the Regional Affairs Department at the Omaha Branch of the Federal Reserve Bank of Kansas City. In this role, he primarily supports the F…