Midwest Land Prices Increase

From the Chicago FRB, via Calculated Risk (who also helpfully links to John Mellencamp's Rain on the Scarecrow):

Farmland values for the second quarter of 2011 climbed 17 percent from the level of a year ago in the Seventh Federal Reserve District. The value of “good” agricultural land increased 4 percent in the second quarter compared with the fi rst quarter of 2011, according to a survey of 226 agricultural bankers in the District. Over 60 percent of the respondents forecasted farmland values to stabilize in the third quarter of 2011, yet about one-third still expected farmland values to move higher.

Agricultural credit conditions were stronger in the second quarter of 2011 relative to a year earlier, as illustrated by a decrease to 2 percent in the portion of agricultural loans perceived by respondents as having “major” or “severe” repayment problems. Repayment rates for nonreal-estate farm loans were higher than a year ago, while renewals and extensions of these loans were lower. Funds availability for lending was up relative to the second quarter of 2010. The demand for non-real-estate loans remained weaker than a year earlier. Interest rates on agricultural operating loans and mortgages dropped under the lows set six months ago. The average loan-to-deposit ratio for the District inched up to 70.3 percent in the second quarter of 2011 from 69.8 in the previous quarter.

Land prices have gotten pretty high, and the "investors" are starting to buy land as the one safe investment, so we may be nearing a peak.  This will mainly depend on commodity prices, so if the inflation fear continues to push the hedge funds and pensions into diversifying their portfolios with more commodities, a potential land bubble may inflate some more.