By MICHELE F. MIHALJEVICH
Indiana Correspondent

CHICAGO, Ill. — Farmland values increased 6 percent in the Midwest in the second quarter of 2010 from the year before, according to the latest “AgLetter” from the Federal Reserve Bank of Chicago.

The bank surveyed 198 agricultural bankers for its August report. The survey area – the Seventh Federal Reserve District – covers Michigan, Iowa, the northern two-thirds of Indiana and Illinois, and southern Wisconsin. “I wasn’t really surprised, because last year, values were weak at this time,” said David Oppedahl, business economist with the bank. “We’re maintaining the levels we had earlier this year.”

For the period July 1, 2009-July 1, 2010, the value of good farmland increased 8 percent in Iowa, 5 percent in Illinois and 4 percent in Indiana, the report stated. It decreased 1 percent in Wisconsin. There was an insufficient response from Michigan.

The amount of good farmland for sale in some areas is a factor in the increase in value, Oppedahl explained.

“There just isn’t that much farmland available. The bidding that occurs for good farmland pushes the values up higher than they should be. If more land were available, it might be a little weaker market,” he added.

The survey asked respondents to predict farmland values for the third quarter. Eighty-five percent said they expect values to remain stable, while the remainder were equally divided between higher and lower values.

“Values were up because we’re seen some recovery in corn and soybean prices, and there’s also been recovery in the livestock industry,” he said. “All of that is pointing toward better revenue projections.”

The bank reported the status of agricultural credit remained about the same in the second quarter. Agricultural loans considered to have severe or major repayment problems were fewer than 4 percent, the same as a year ago.

“It wasn’t worse than the year before, but it would have been nice to see some decrease in the numbers,” Oppedahl noted. “It’s amazing it didn’t increase.”

The overall health of agriculture seems to be pretty good even though some sectors, such as dairy, are hurting a bit more, he added.

“In the last decade, there was quite a good run for agriculture. The balance sheets of many farmers improved over the decade. Because of that, they were ready for the downturn,” he said. “Good farm management was important. And for dairy, hopefully feed costs won’t get too high in relation to the recovery in the price of milk.”