The retreat in US farmland values is showing signs of petering out, in the Corn Belt at least, amid a slowdown in the pace of agricultural finances – although crop price weakness as raised fears of fresh "pressures".
Farmland prices in key Corn Belt corn and soybean growing states such as Illinois, Indiana and Iowa rose by 1% year on year in the April-to-June quarter, the US Federal Reserve's Chicago bank said.
"This was the first year-over-year gain in three years," the Fed said, with growth particularly strong in Iowa, the top corn-growing state, where values rose 3% year on year, their fastest since the July-to-September period of 2013.
Farmland values in the region, which dropped by roughly 7% over 2014-16, "seemed to stabilise in the first half of 2017, despite lower prices for corn and soybeans relative to a year ago", Fed senior business economist David Oppedahl said.
'Easing in the pace of deterioration'
The recovery came amid signs of an easing in the pace of deterioration in farm financial indicators, with the Fed saying that agricultural credit conditions "slowed their downward trend.
"Repayment rates for non-real-estate farm loans relative to a year ago were still down during the second quarter of 2017, but less so than in the first quarter," Mr Oppedahl said.
And ideas of some market stabilisation were supported by data from the Fed's St Louis bank, which covers more southerly Corn Belt areas, down to the Delta state of Mississippi, which showed "quality" farmland values recording "small decreases", of 0.8% year on year, in the April-to-June period.
"Ranchland and pastureland exhibited [price] increases compared with a year earlier," of 4.5%, the St Louis Fed said.
However, further west, in the Plains, better known for wheat growing, farmland values continued to decline, by 5% year on year, in a region including Kansas, Nebraska and Oklahoma states, covered by the Kansas City Fed.
Values of irrigated land, which proved particularly strong in the run-up to the 2014 market peak, led the decline, dropping by 7%, with non-irrigated farmland depreciating by 5%, and ranchland by 4%.
Even so, the Kansas City Fed, terming the land prices falls "modest", said that the pace of deterioration in the region's farm economy "has slowed".
"Bankers were generally less pessimistic about economic conditions in the farm sector in the second quarter than in each of the past two years."
Nonetheless, lenders showed some expectation of further land price falls ahead, with research in the St Louis Fed area, from southern Illinois through Missouri and Arkansas to Mississippi, showing that "proportionately more bankers expect quality farmland values and rents will decline in the third quarter of 2017 relative to a year ago.
"Respondents also expect that ranchland and pastureland values and rents for the third quarter will decline relative to a year ago."
The David Oppedahl said that in the Chicago Fed's region, there was a negative bias on the price outlook too, with 22% of lenders surveyed expecting a drop in prices in the July-to-September period, compared with 2% foreseeing an increase, with the balance of 76% forecasting "stable" conditions.
"District farmland values were expected to stay at their current levels or decline a bit in the third quarter," he said.
'Pressures have re-emerged'
Indeed, he cautioned over the dent to prospects for ag sector prosperity in the region, given "substantial concerns about this year's corn and soybean yields".
Dryness has raised questions over crops in Iowa and Illinois in particular, while parts of Indiana have struggled with excessive rains.
However a" rally in corn and soybean prices failed to materialise, given the large stocks in storage, from record harvests in 2016".
"Pressures on the earnings of corn and soybean farms have re-emerged after better-than-expected returns from 2016's crops."