By Gerelyn Terzo, Global AgInvesting Media
In its latest Ag Letter on farmland values, the Federal Reserve Bank of Chicago offered valuable insights from a polling of District agricultural bankers, revealing key trends for early 2025. Overall, the agricultural landscape in the American Heartland, particularly states within the Seventh Federal Reserve District, continues to evolve, presenting a nuanced picture of promising farmland value increases alongside tightening credit conditions that are causing farmers some challenges.
Ag land values in the Seventh Federal Reserve District — comprising Iowa and most of Illinois, Indiana, Michigan and Wisconsin. — rose a slight 1 percent in Q1 2025 year-over-year. More notably, “good” quality farmland saw a 4 percent quarter-over-quarter increase in Q1 2025, a trend that appears to be persisting, suggesting a premium on more productive acreage. Wisconsin, in particular, stood out with an 11 percent increase in “good” farmland values in the 12-month period leading up to April 2025.
Despite these incremental gains, there are signs of softening demand. Bankers reported lower demand for purchasing farmland in the months leading up to March 2025 compared to the same period last year. Meanwhile, the amount of farmland available for sale and the number of acres sold both decreased over the winter and early spring. This indicates a market where transactions are occurring, but at a slower pace and with less competitive bidding pressure.
Regarding cash rental rates, the District saw a modest 2 percent decrease in average annual cash rents for farmland in 2025, marking the first decline since 2020. This trend was mixed. While Illinois and Iowa experienced declines of 2 percent and 3 percent respectively, Indiana experienced a 1 percent rise and Wisconsin saw a 3 percent jump.
While land values have held their ground, the agricultural credit environment shows signs of strain. The first quarter of 2025 brought weakened credit conditions across the District. Repayment rates for non-real-estate farm loans were notably lower than a year ago, extending a six-quarter streak of declines and reaching their lowest point since the pandemic era. Additionally, renewals and extensions of these loans climbed to their highest level in five years.
Demand for non-real-estate farm loans, which are like working capital for a farm and exclude land or buildings as collateral, remains robust, increasing for the sixth consecutive quarter to its highest level since Q1 2016. Strong demand, coupled with a decrease in the availability of funds for ag lending (for the eighth straight quarter), paints a challenging picture for farmers seeking financing. One Illinois banker shared that “working capital decreased dramatically in 2024 and probably will in 2025 as well,” highlighting the liquidity challenges many farming operations face.
On average, close to 20 percent of farm borrowers reported having more carryover debt — loans not paid off from the previous growing season — in 2025 vs. 2024. This trend underscores the financial pressures on farmers, driven in part by a persistent squeeze from elevated input costs and generally lower crop prices compared to the 2021-2023 period. Livestock producers appear to be faring somewhat better due to sustained strong prices and a slight decrease in feed costs.
Looking ahead, bankers surveyed by the Chicago Fed generally anticipate a rise in the overall volume of non-real-estate farm loans in Q2 2025, particularly for operating, feeder cattle and FSA-backed loans. This reflects the ongoing need for working capital within the ag sector.
Even with close to 50 percent of bankers viewing farmland as overvalued in Q1 2025 – and a mere 1 percent seeing it as undervalued – there’s a strong expectation of stability in the near term. Over two-thirds of survey participants predict ag land values will hold steady through the second quarter of 2025.
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