Farmland prices in the U.S. Plains and Midwest eased along with farm income in the first quarter of 2014 and more weakness was expected into the summer, according to Federal Reserve Bank quarterly surveys issued on Thursday.
Tighter profit margins for crop producers were a drag on farm income in the first quarter despite improved profitability in the livestock sector, the Kansas City Fed reported.
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"Low corn and soybean prices combined with relatively high input costs tempered farm income and cropland values as spring planting approached," the Kansas City Fed said in its survey of 228 regional farm lenders in the central and southern Plains states, major producers of wheat, corn, cattle, sheep and other food commodities.
The price of farmland is closely watched by Fed policy makers, farm lenders and farm suppliers from equipment makers to seed dealers since farmland is the basic collateral for most farm loans. A five-year boom in grain prices fed by exports and biofuels ended last fall after a bumper harvest. But land auctions over the winter generally held up well, relieving bankers who have fretted about a potential "farmland bubble" popping after the boom.
The Kansas City Fed said non-irrigated farmland values dipped only 1.4 percent from the fourth quarter of 2013 while irrigated farmland values rose 0.5 percent. Strong demand for high-quality grazing pastures pushed ranchland values up 2.6 percent. Compared to a year ago, average prices for non-irrigated crop land were up 4.4 percent, for irrigated land up 6.4 percent and for ranchland up 8.6 percent, the survey showed.
That resilience was also reflected in the land values to the east of Kansas City. The St Louis Fed, in its quarterly survey of 49 farm lenders in the mid-South and southern Midwest, said on Thursday that average crop land values eased 6.3 percent from the fourth quarter while grazing land prices remained steady, reflecting the same trends in market prices and income seen in the Kansas City survey.
"Farm income in the first quarter turned out to be modestly stronger than respondents expected three months earlier," the St Louis Fed said.
The Federal Reserve Bank of Chicago is due to issue its quarterly land survey of the northern Corn Belt on Thursday afternoon.