LINCOLN, Neb. (DTN) – While agriculture land values grew by 3% in several Midwest states year over year, a new report from the Federal Reserve Bank of Chicago shows strain in agriculture with falling cash rents, rising loan rollovers, tightening credit and near-breakeven cash flows on farms.

The May 2026 Ag Letter from the bank, based on a survey of 104 agricultural lenders in Iowa, Illinois, Indiana, Wisconsin and Michigan, also found land values dipped by 1% since the fourth quarter of 2025.

The demand for farmland has fallen as well, as just 11% of lenders reported higher buyer demand while 22% reported lower demand for land.

The survey shows the number of farms sold, acreage sold and farmland listed for sale were all down compared to one year ago.

Cash rents dropped by 3% overall in 2026 in the region, which was the second consecutive annual decrease after years of increases from 2021 to 2024, according to the survey.

Most notably, Iowa reported the biggest drop in rents by 4% year over year and Indiana was the lone bright spot with a 2% increase in rents.

Cash rents typically are a leading indicator of farm profitability expectations. So, when rents fall, it suggests farmers and landowners expect tighter margins ahead.

The report also paints a picture of deteriorating farm credit conditions in the five states.

Survey respondents forecast a decline in the district's farm real estate loan volume for the second quarter of 2026, relative to one year ago.

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

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

Demand for farm loans has been rising for 10 straight quarters, according to the survey, as farmers are increasingly reliant on borrowing. Conversely, lenders have less to loan as available funds have fallen for 12 consecutive quarters. In addition, 17% of farm borrowers carried over debt from 2025 to 2026.

Loan renewals and extensions are at their highest level since the COVID-era disruptions of 2020 and lenders are demanding more collateral than one year ago, according to the report.

"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,'" the report said.

"Unsurprisingly, survey respondents forecast that the overall volume of non-real-estate farm loans would rise in the district during the April through June period of 2026 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)."

Todd Neeley can be reached at todd.neeley@dtn.com

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