Chicago Fed: Farmland values up from year ago

Editor's note: The following was written by David Oppedahl and Elizabeth Kepner with the Federal Reserve Bank of Chicago for the May AgLetter.

In the first quarter of 2026, the Seventh Federal Reserve District's agricultural land values saw a 3% increase from a year ago.

Yet "good" farmland values dipped 1% from the fourth quarter of 2025 to the first quarter of 2026, according to the survey responses of 104 district agricultural lenders.

Demand to purchase farmland was lower in the three- to six-month period ending with March 2026 than in the same period ending with March 2025 (11% of survey respondents reported higher demand and 22% reported lower demand).

Also, farmland for sale was down during the winter and early spring of 2026 compared with a year earlier.

Likewise, farms and the acreage sold were down in the winter and early spring relative to a year ago.

Annual cash rental rates for district farmland saw a decrease of 3% in 2026 — their second consecutive decrease after increases from 2021 through 2024.

For 2026, average annual cash rents for farmland were up 2% in Indiana, but down 1% in Illinois, 4% in Iowa and 1% in Wisconsin.

Credit conditions

District agricultural credit conditions weakened during the first quarter of 2026. Repayment rates for non-real-estate farm loans were lower in the January through March compared with a year ago, and the renewals and extensions of these loans were higher.

In the first quarter of 2026, demand for non-real-estate farm loans relative to a year ago was up for the tenth consecutive quarter, while the availability of funds for agricultural lending relative to a year earlier was down for the 12th consecutive quarter.

The index of demand for non-real-estate farm loans indicated strong demand in the first quarter of 2026.

Fifty percent of the responding lenders noted higher loan demand compared with a year ago and 9% noted lower demand.

The index of repayment rates for non-real-estate farm loans was down from a year ago for the tenth consecutive quarter.

Thirty-eight percent of responding lenders observed lower rates of repayment for the first quarter of 2026 relative to the first quarter of 2025, while 1% observed higher rates.

The index of loan renewals and extensions reached its highest value since the second quarter of 2020.

Furthermore, responding lenders reported that, on average, 17% of their farm borrowers had more carryover debt (loans not paid off at the end of the growing season and subsequently carried over into the next one) in 2026 than in 2025.

At 79.8%, the average loan-to-deposit ratio in the first quarter of 2026 was up a bit from the previous quarter and was nearly 3 percentage points below the average level desired by responding lenders.

The amount of collateral required by agricultural lending institutions across the district was somewhat higher than a year earlier.

Looking forward

According to an Iowa lender, "Cash flow projections for many operations are at or below breakeven for 2026 and many borrowers are using up working capital to fund those cash flow shortfalls."

Survey respondents forecasted that the overall volume of non-real-estate farm loans would rise in the district during the April through June relative to the same period of 2025 (41% of the responding lenders expected a higher volume of such loans, while 8% expected a lower volume).

In particular, operating loans, feeder cattle loans and loans guaranteed by the Farm Service Agency were anticipated to have higher volumes relative to a year earlier, while farm machinery, grain storage construction and dairy loans were anticipated to have lower volumes.

Survey respondents narrowly forecasted a decline in the district's farm real estate loan volume in the second quarter of 2026 from a year earlier.

In the first quarter of 2026, 56% of survey respondents considered farmland to be overvalued, while just 1% considered it undervalued.

Even so, over 80% of the responding lenders expected farmland values to be unchanged in the second quarter of 2026; 9% of respondents forecasted agricultural land values to decrease, and 8% forecasted them to increase.