This is the first quarter where land value increases were less than 10% since the first quarter of 2021. The Chicago Federal Reserve District includes Illinois, Indiana, Iowa, Michigan, and Wisconsin. As has been true for the last year or so, Indiana has led the increase at about 23% year-over-year. However, the increase for the second quarter was zero in Indiana. This appears to show a topping of land values for at least this state. Iowa and Illinois had small increases for the second quarter while Wisconsin had a more healthy increase at 6%.
Even though interest rates were higher this year than last, agriculture credit conditions are better. Rates averaged 7.33% for real estate loans while operating loan rates were about a point higher.
A table shows the percentage of loans with severe or major repayment problems and the second quarter reading of 1.3% was the lowest ever recorded. As an example, the highest rate was in 1986 at about 18% and the highest rate in the last ten years was 2020 at about 8%.
If interest rates stay high and crop values continue to stay lower than last year, we may see a drop in land values. However, there is still plenty of working capital available to farmers to keep land values propped up, at least for several more months.
