The Federal Reserve Bank of Kansas City reported that average farmland and ranchland values in its region fell by 6 percent and 7 percent in Q4 2016, respectively, compared with Q4 2015.
Reporting on a district that includes Kansas, Nebraska, Oklahoma and Western Missouri, the bank’s quarterly report noted that the drop was the largest since the recession of 2007-2009.
The most significant declines were seen in Kansas, where non-irrigated farmland values fell by 13 percent and ranchland values declined by 10 percent.
Seventy-five percent of bankers responding to the survey indicated they expect the value of non-irrigated farmland to decrease further in 2017, while only 5 percent expected an increase in non-irrigated farmland values. A majority of the bankers expected a decline of 6 percent to 10 percent in non-irrigated farmland values by year-end 2017.
The report also noted that challenging farming margins have reduced liquidity in the sector. While 23 percent of farmland purchases in the region were made with cash down payments in 2012, that figure dropped to 16 percent in 2016.
Reflecting an observation made by Farmer Mac during its Q3 conference call, the report noted that loan delinquencies did not rise substantially in Q4, but bankers did report increasing demand for new loans, renewals and extensions.
“Producers appeared to be selling commodities only when necessary to make loan payments but otherwise storing commodities in the hope of better prices in the future,” according to the report.
Looking ahead, the report said some bankers surveyed indicated expectations that a decline in cash rents would provide a degree of relief for regional farmers in 2017, while also noting expectations that high yields would likely leave regional farm incomes subdued this year.