Many parts of the nation continue to see an increase in farmland values. In a recent survey of 370 agricultural bankers, the Federal Reserve Bank of Chicago reports that farmland values in the Seventh District rose 7% in 2002, the largest increase since 1997. According to the survey, farmland values are projected to increase over the next several months. In fact, credit conditions in every state included in the Seventh District appear to be the best in several years with all reporting improved availability of funds. Farm loan interest rates declined to the lowest level in the last thirty years with the district average for interest rates on new operating loans at 6.7% and farm mortgages interest rates averaging 6.51% as of January 1.
The Federal Reserve Bank of Kansas City also reports that district farmland values posted solid gains in 2002 with non-irrigated cropland increasing 6.8%, irrigated cropland increasing 5%, and ranchland increasing 6.2%. While the K.C. Fed district experienced a higher farm commodity price index in the 3rd quarter of last year, farm credit conditions continued to weaken as loan repayment rates slowed and loan renewals or extensions picked up. Interest rates on new farm loans were down with operating loan interest rates averaging 7.89%, machinery and intermediate-term loans averaging 7.94%, and 7.48% for real estate loans. Lower farm income and capital spending is planned as two-thirds of banks indicate that a majority of farm borrowers use off-farm income to support their farm operations.