Farmland values rose 16% in 2007 in Illinois, Wisconsin, Michigan and Indiana, the largest annual increase in almost 30 years, according to the Chicago Federal Reserve Bank. In 2006, farmland values in the district rose 9%. From 2004 through 2007, the annual gain averaged 12%. Adjusted for inflation, the four-year gain averaged 8% a year.
The 2007 data, based on 265 responses from agricultural bankers in the Chicago district, was reported in the Chicago Feds AgLetter issued Feb. 28. Farmland data for the entire U.S. for 2007 wont be available until August, said David B. Oppedahl, business economist for the Chicago Fed. But the national average increase in farmland was 14% in 2006,according to a U.S. Department of Agriculture report.
Mr. Oppedahl, author of the report, said in an interview that hes heard of some very good returns for institutional investors. Higher net farm income boosted farmland values toward the end of 2007 as corn and soybean prices moved even higher than a year ago, fueled by demand for both ethanol and exports, Mr. Oppedahl wrote in the report. The district accounts for half of corn and 40% of soybean production in the U.S., Mr. Oppedahl said in the interview.
Inflation-adjusted farmland values have more than doubled from their low in 1986, the report said. So, even with the strong run of increases in farmland values from 2004 to 2007, there was room for continued increases, as expected by district bankers, before approaching new records in real terms.