Agricultural credit conditions improved in the first quarter, and farm real estate values continued to increase alongside strength in the U.S. farm economy. Following a year of accelerating increases, the value nonirrigated cropland across much of the U.S. has soared in 2022 through March. The sharp growth in land values persisted despite a slight increase in farm loan interest rates. With broad strength in farm finances, farm loan repayment rates continued to increase and credit conditions remained strong.

The outlook for agricultural credit conditions remained optimistic alongside persistently strong commodity prices. However, External Linkmany lenders expected conditions to soften in coming months alongside the pressures to profit margins from higher input costs and harsh drought conditions in large portions of the country. Farm real estate markets also remained strong, but reduced profit margins or higher interest rates could limit gains in land values in the year ahead.

First Quarter Federal Reserve District Ag Credit Surveys

Growth in farm real estate values remained high and accelerated in some regions. Similar to the previous quarter, the value of nonirrigated cropland rose by more than 20% from a year ago in Federal Reserve Districts with a large agricultural concentration (Chart 1). The annual pace of growth increased from the previous quarter in the Dallas and Chicago Districts. Values in the Dallas region also accelerated on a quarterly basis, but steadied to a pace similar to early 2021 in other areas.

Chart 1: Nonirrigated Cropland Values – includes two individual charts. Left, Annual Change: 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 Q1 2022. Right, Quarterly Change: is a line chart showing the percent change in nonirrigated cropland values from the previous quarter the Chicago, Dallas, Kansas City and Minneapolis Districts in every quarter from Q1 2020 to Q1 2022.  Sources: Federal Reserve District Surveys of Agricultural Credit Conditions.

The strength in farm real estate values remained consistent across all states. The value of nonirrigated cropland increased by more than 20% in the majority of states represented in the participating Districts during the first quarter (Map). The increase was particularly sharp in Iowa, Kansas and the Mountain States where values were about 30% higher than a year ago.

Map: Nonirrigated Cropland Values, First Quarter 2022 - is a map showing the percent change in nonirrigated cropland values from the previous in Q1 2022 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.   *Mountain States include Colorado, northern New Mexico and Wyoming, which are grouped because of limited survey responses from each state. Sources: Federal Reserve District Surveys of Agricultural Credit Conditions

Agricultural real estate values continued to rise sharply despite a slight uptick in interest rates. The average fixed rate charged on farm loans increased in all Districts following an increase in the federal funds rate in mid-March (Chart 2). Fixed rates increased by an average of 20 basis points from the previous quarter across all regions, with a slightly faster rise in the Chicago District.

Chart 2: Average Interest Rates*: is a line graph showing the average fixed interest rate in all applicable Districts in all quarters from Q1 2010 to Q1 2022, with individual lines for the Chicago, Dallas, Kansas City, Minneapolis and St. Louis Districts.  *Average of fixed rates on agricultural loans of all types – operating, intermediate and real estate. Note: St. Louis survey began Q2 2012. Chicago District includes only operating and real estate loans.  Sources: Federal Reserve District Surveys of Agricultural Credit Conditions.

With high commodity prices supporting farm finances, credit conditions improved further. Farm loan repayment rates increased at a pace similar to recent quarters in most regions and rose at a slightly faster pace in the Chicago and Minneapolis Districts (Chart 3). It marked the fifth consecutive quarter of higher rates of repayment in nearly all regions.

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 2019 to Q1 2022.  *Bankers responded by indicating whether conditions during the current quarter was higher than, lower than or the same as in the year-earlier period. The index numbers are computed by subtracting the percentage of bankers who responded "lower" from the percentage who responded "higher" and adding 100.’ Sources: Federal Reserve District Surveys of Agricultural Credit Conditions.

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

Nate Kauffman

Vice President, Economist and Omaha Branch Executive

Nate 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 state …

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…