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Farmland values continue to slump

Farmland values and cash rents declined moderately in the fourth quarter of 2016, according to the Federal Reserve Bank of Kansas City’s Agricultural Credit Survey.

Bankers across the seven-state Tenth District noted that persistent weakness in farm income continued to weigh on farmland values. On average, nonirrigated and irrigated farmland values dropped 6 percent, and ranchland values fell 7 percent from the same period last year. Cash rents for nonirrigated and irrigated cropland each fell 8 percent while ranchland cash rents fell 12 percent from the fourth quarter of 2015.  

Credit conditions also weakened alongside lower farm income, and bankers have adopted some risk prevention measures in response. For example, variable and fixed interest rates increased for all types of farm loans. More than 30 percent of bankers also reported an increase in collateral requirements, the largest share in survey history. Though a credit shortage currently appears unlikely, marginal producers may find it harder to obtain financing at the same pace as when farm credit conditions were stronger.

Read the report at www.kansascityfed.org/research/indicatorsdata/agcreditsurvey.

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