DES MOINES (AP) — The Federal Reserve Bank said the value of Iowa's farmland dropped slightly in the final months of 2013, and some expect those declines to continue.
The Federal Reserve's Chicago branch found the average value of “good” farmland in Iowa dropped by 1 percent in the last three months of the year, according to the Des Moines Register. Iowa's land prices dropped by 2 percent for the year.
Although the decline is small, it marks a dramatic change from recent years, during which Iowa's farmland values reached record highs.
That rise was fueled largely by high commodity prices, which have dropped to much lower levels, as well as low interest rates that made it cheap to borrow money.
Iowa State University economics professor Chad Hart said that as farmers earn less from their crops, they have less to spend on farmland, sending prices lower. “What the Chicago Fed found is a harbinger of things to come,” Hart said. “We'll likely see lower farm values tied to those lower farm incomes that we're going to experience in the next year to year and a half.”
In other states included in the Federal Reserve Bank of Chicago's territory, prices were mixed. Prices were up by 6 percent in Indiana and 3 percent in Illinois but fell by 1 percent in Wisconsin. There weren't enough survey responses in Michigan to determine farmland values.
David Oppedahl, a business economist at the Reserve Bank, said it appears as if soaring prices will end. “Combined with expectations of diminished farmland purchases by farmers in 2014, these survey responses cast a pall over the spectacular growth in agricultural land values of the past few years,” Oppedahl said.
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