WSJ article on farmland prices.
February 13, 1999
Fed Survey Finds Farmland Prices
Hit By Falling Exports, Grain Glut
By SCOTT KILMAN
Staff Reporter of THE WALL STREET JOURNAL
CHICAGO -- Farmland prices are beginning to drop across the Great Plains,
reflecting a steep downturn in farm commodity prices, according to the
Federal Reserve Bank of Kansas City.
The Kansas City Fed said in its latest quarterly survey of agricultural credit
conditions that the price of nonirrigated cropland in the seven-state district
during the third quarter ended Sept. 30 dropped 1.3% from the trailing second
quarter.
Cropland prices in the district during the third quarter were still 3.9% higher
than the similar 1997 quarter. But the Kansas City Fed said it expects land
prices to weaken throughout 1999. "I think this is probably the beginning of
some softness for land prices," said Russell L. Lamb, a senior economist at the
Kansas City Fed.
A global grain glut and slumping exports are depressing prices of U.S. crops
and livestock. With farm profits slumping, farmer demand for land is
evaporating.
Economists are watching the rural real-estate markets closely because land is
the biggest source of collateral for farmers. A big drop in land prices would
weaken the creditworthiness of farmers.
The Nebraska farmland market is the weakest in the 10th district. The price of
Nebraska ranchland, for example, dropped 2.5% in the third quarter from the
trailing second quarter.
The Kansas City Fed's quarterly survey of 316 farm banks also found that
more farmers in the district are beginning to fall behind on loan payments, and
that bankers are beginning to tighten lending standards.
Although most agricultural banks are in good shape financially, Mr. Lamb said
that another drop in farm income this year would begin to weaken them. "I
don't see a lot of reasons for optimism," Mr. Lamb said.
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