The year-over-year increase in farmland values was 4% in the first quarter of 2010 for the Seventh Federal Reserve District, according to the Federal Reserve Bank of Chicago. There was also a quarterly increase of 2% in the value of “good” agricultural land, according to the April 1 surveys returned by 215 district bankers.

At 1%, the growth in district farmland cash rental rates slowed down dramatically from 2009. The demand to purchase farmland during the first quarter of 2010 strengthened from a year ago. A rising share of purchases by farmers buoyed this demand. However, the amount of farmland for sale, the number of farms sold and the acreage sold weakened in the first three months of 2010 relative to the same period in 2009. The vast majority of the bankers anticipated stable land values during the second quarter of 2010.

Trends in agricultural credit conditions were unchanged during the first quarter of 2010. There was stronger demand for non-real-estate farm loans and greater availability of funds for lending compared with the same period in 2009. Loan repayment rates were lower, while renewals and extensions of agricultural loans were higher. Interest rates on farm loans continued to move lower, averaging 6.13% for new operating loans and 6.04% for real estate loans. Loan-to-deposit ratios averaged 73.7% – more than 5% under the level preferred by the respondents.

For the full report, go to the bank’s Ag Letter website.