AgLetter: August 1997

The Federal Reserve Bank of Chicago’s latest survey of agricultural bankers indicated that the uptrend in farmland values continued this spring, but at a slower pace. A weighted average of the nearly 375 responses found that District farmland values rose 1.4 percent during the second quarter and more than 8 percent during the 12 months ending with June. The respondents also indicated that farm loan demand continued strong in the second quarter. However, the availability of funds at banks for making new farm loans apparently tightened due to relatively slow growth in deposits and stiffer competition from other farm lenders. In addition, farm loan repayment rates slowed, especially in areas where the troubled dairy sector is more prevalent. Despite slower repayments, the bankers continued to judge the quality of their farm loan portfolio as high.