For the first time in five years farmland values declined in the third quarter compared to the previous quarter. After 19 consecutive quarters of growth, the latest report from the Seventh Federal District which assesses farmland values and credit conditions, estimated a 2% decrease in farmland values compared to the second quarter on falling grain prices. Farmland values in Indiana posted a 4% increase over the second quarter and a 3% increase over last year and values in Michigan reported a 1% increase over the second quarter and a 10% increase over last year, but farmland values in Iowa, Wisconsin, and Illinois all posted declines of 6%, 4%, and 2% respectively. The majority of survey respondents did not express confidence regarding farmland values going into the fourth quarter with 56% stating that they expected values to continue decreasing and 44% stating that they expected values to remain flat. Farm incomes have declined for the second time year on year since 2009 as corn prices have fallen 15% and soybean prices have fallen 20% from last year. This decline in income has slowed the repayment rate for non-real estate loans to their lowest level since the second quarter of 2010. As the credit environment tightens for farmers, bankers are expecting collateral requirements to increase forcing farmers to possibly sell land to raise money through alternative methods, indicating that the farmland market could be selling at a discount into 2015.
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