Midwest farmland values flat, and 3.7 percent of farm loans are now in trouble

The Federal Reserve Bank of Chicago's August AgLetter, covering the second quarter of 2026, describes a farmland market that has stopped moving and a credit market that is starting to strain.

Land

"Good" farmland across the Seventh District (Iowa, most of Illinois, Indiana, Michigan, and Wisconsin) was unchanged from a year ago in nominal terms. Adjusted for inflation, that is a 3.7 percent real decline, the largest since the third quarter of 2016. Quarter over quarter, values were flat.

By state, the picture splits:

• Illinois and Iowa: up year over year. Iowa was up about 4 percent.
• Indiana and Wisconsin: down.

Lenders are not expecting a rebound. Only 5 percent of survey respondents thought values would rise in the third quarter; 81 percent said stable, 14 percent said down. Notably, 43 percent of the bankers surveyed said they think district farmland is overvalued. One respondent put it plainly: "At some point farmland values should plateau as outside pressure from solar and data centers subsides."

That last comment is worth sitting with. A meaningful share of recent land price support in the eastern Corn Belt has come from buyers who are not farming it.

Credit

This is the more important half of the report for anyone who borrows money:

• Farm loans with "major" or "severe" repayment problems: 3.7 percent of the portfolio, up from 2.9 percent a year ago and the highest since 2020.
• Loan repayment rate index: 73 (below 100 means more lenders saw rates fall than rise).
• Loan renewals and extensions index: 124, meaning lenders are rolling over notes rather than seeing them paid off.
• Loan-to-deposit ratio at reporting banks: 80.7 percent, the highest since the survey began collecting it in the 1970s.

Interest rates at the end of the quarter: operating loans 7.12 percent, feeder cattle loans 7.14 percent, real estate 6.79 percent.

Reading it from the ranch side

Livestock producers are the bright spot in these numbers. Cattle prices have kept cow-calf and backgrounding operations current on their notes while row-crop borrowers absorbed a third year of thin or negative margins. The August grain rally will help if it holds through harvest, but it came too late for most 2026 operating notes.

For anyone thinking about buying pasture or cropland this winter: sellers are not getting the bids they got two years ago, lenders are skittish about appraisals, and the bankers themselves say the land is fully priced. That is not a bad time to be a buyer with cash, and a hard time to be one without it.