Farmland prices may edge down, bankers say

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Posted: Friday, November 22, 2013 12:00 am

About half the rural Midwestern bankers in a survey said they expect farmland prices to decline by an average of 1 percent over the coming year.

The bankers also said the 10-state region's rural economy continues to grow and add jobs at about the same slow rate as a month ago, Creighton University economist Ernie Goss said Thursday.

A fallback in land prices would reverse several years of rapid increases, fueled by strong prices for grain boosted by demand for ethanol production.

Overall, the bankers' responses yielded a Rural Mainstreet Index of 54.3, the same as a month ago. An index of 50 is neutral. Higher numbers show expansion; lower numbers show decline.

The survey's farmland index remained in the growth zone, indicating that prices are still climbing this fall. If prices decline, the reasons could be falling grain prices and an increase in the amount of land being offered for sale, the report said.

Goss and Greeley, Neb., banker Bill McQuillan originated the survey, which this month received responses from 192 bank executives in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

The bankers' confidence index, which reflects their outlook for the economy six months from now, was 48.3, up from 44.7 in October but still indicating a decline.

Goss said the lack of a federal farm bill, lower commodity prices and proposed reductions in required ethanol production are trimming optimism in rural areas, and the bankers' views reflect that dampening.

The survey also showed growth in home sales in rural areas but declines in retail business and farm equipment sales.

Nebraska's index was 54.8, down from 54.9 in October but the 10th straight month above growth-neutral 50. The state's farmland price index was 48.3, up from 45.5 in October but still indicating declining prices.

Iowa's index was 53.9, down from 55.3 in October. The farmland price index was 53.5, up from 50.6 in October.

The figures are from a survey of 192 bank executives in rural and non-urban areas of Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

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Category October November
Overall 54.3 54.3
Loan volume 64.7 56.9
Checking deposits 48.3 72
CDs 35.4 44.8
Ag land prices 50.9 54.3
Ag equip. sales 44.6 47.3
Home sales 58 56.2
Hiring 56.1 54.4
Retail 52.6 47.4
6-mo. forecast 44.7 48.3

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